income effect
  • A table of numbers showing the amounts of a good or service buyers are willing and able to purchase at various prices over a specified period of time.
  • sets the maximum legal price a seller may charge for a product or service. A price at or below the ceiling is legal; a price above it is not
  • at a lower price buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive. The product whose price has fallen is now "a better deal" relative to the other products
  • a lower price increases the purchasing power of a buyer's money income, enabling the buyer to purchase more of the product than before
equilibrium quantity
  • movement from one point to another-from one price-quantity combo to another on fixed demand curve
  • sets the maximum legal price a seller may charge for a product or service. A price at or below the ceiling is legal; a price above it is not
  • a minimum price fixed by the government. A price at or above the price floor is legal; a price below it is not
  • quantity at which the intentions of buyers and sellers match, so that the quantity demanded and the quantity supplied are equal.
diminishing marginal utility
  • in any specific time period, consumer will receive less and less satisfaction with each subsequent purchase/consumption of a product
  • (market clearing price) the price where the intentions of buyers and sellers match. It is the price where quantity demanded equals quantity supplied
  • increase the quantity of organs available for transplant.
  • movement from one point to another-from one price-quantity combo to another on fixed demand curve
characteristics of downward sloping demand curve
  • increase in purchasing power as market price decreasesdiminishing marginal utility
  • movement from one point to another-from one price-quantity combo to another on fixed demand curve
  • result in a surplus of wheat.
  • incomeprice of related goodstastes and preferencesnumber of consumers
For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm's shares demanded equals the quantity supplied. So, if this equality always occurs, why do the prices of stock shares ever change?
  • raise their price and increase their quantity supplied.
  • Prices change in reaction to a mismatch between Qd and Qs.
  • Add up quantities supplied by all individual producers for each price
  • increases in the supply of computer memory have exceeded increases in demand.
With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will:
  • Add up quantities supplied by all individual producers for each price
  • The expectation by consumers that gasoline prices will be higher in the future.
  • decrease equilibrium price and increase equilibrium quantity.
  • increase in purchasing power as market price decreasesdiminishing marginal utility
allocative efficiency
  • quantity at which the intentions of buyers and sellers match, so that the quantity demanded and the quantity supplied are equal.
  • "The price of corn rises and falls in response to changes in supply and demand."
  • the particular mix of goods and services most highly valued by society (minimum-cost production assumed)
  • the production of any particular good in the least costly way
ver time, the equilibrium price of a gigabyte of computer memory has fallen while the equilibrium quantity purchased has increased. Based on this we can conclude that:
  • increases in the supply of computer memory have exceeded increases in demand.
  • incomeprice of related goodstastes and preferencesnumber of consumers
  • a decline in income if X is an inferior good.
  • increase in purchasing power as market price decreasesdiminishing marginal utility
Supply increases and demand is constant.
  • demand curve for X to the right.
  • Price: Decreases Quantity: Increases
  • Price: Increases Quantity: Decreases
  • price and quantity supplied.
Assume the demand curve for product X shifts to the right. This might be caused by:
  • quantity supplied exceeds quantity demanded.
  • Add up quantities supplied by all individual producers for each price
  • The expectation by consumers that gasoline prices will be higher in the future.
  • a decline in income if X is an inferior good.
What are the determinants of supply?
  • movement from one point to another on a fixed supply curve. The cause of such a movement is a change in the price of the specific product being considered.
  • Price: Decreases Quantity: Decreases
  • A table of numbers showing the amounts of a good or service producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.
  • technologyresource pricesnumber of sellers in markettaxes and subsidies producer expectations- change in any one of these (supply shifters) will move supply curve- shift right = increase supply and vic versa
inferior goods
  • at a lower price buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive. The product whose price has fallen is now "a better deal" relative to the other products
  • sets the maximum legal price a seller may charge for a product or service. A price at or below the ceiling is legal; a price above it is not
  • Goods whose demand varies inversely with money incomeeg As incomes increase beyond some point, the demand for used clothing, retread tires, and third-hand automobiles may decrease because the higher incomes enable consumers to buy new versions of those products
  • a lower price increases the purchasing power of a buyer's money income, enabling the buyer to purchase more of the product than before
If X is a normal good, a rise in money income will shift the:
  • price and quantity supplied.
  • quantity supplied exceeds quantity demanded.
  • demand curve for X to the right.
  • A and B are complementary goods.
What are the determinants of demand?
  • technologyresource pricesnumber of sellers in markettaxes and subsidies producer expectations- change in any one of these (supply shifters) will move supply curve- shift right = increase supply and vic versa
  • incomeprice of related goodstastes and preferencesnumber of consumers
  • The expectation by consumers that gasoline prices will be higher in the future.
  • "The price of corn rises and falls in response to changes in supply and demand."
law of supply
  • As price rises, the quantity supplied rises; as price falls, the quantity supplied falls
  • A table of numbers showing the amounts of a good or service producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.
  • A table of numbers showing the amounts of a good or service buyers are willing and able to purchase at various prices over a specified period of time.
  • "The price of corn rises and falls in response to changes in supply and demand."
The supply curve shows the relationship between:
  • Price: IndeterminateQuantity: Increases
  • Price: Increases Quantity: Decreases
  • price and quantity supplied.
  • Price: Decreases Quantity: Decreases
changes in demand
  • movement from one point to another on a fixed supply curve. The cause of such a movement is a change in the price of the specific product being considered.
  • quantity at which the intentions of buyers and sellers match, so that the quantity demanded and the quantity supplied are equal.
  • at a lower price buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive. The product whose price has fallen is now "a better deal" relative to the other products
  • A change in one or more of the determinants of demand will change the demand data;demand curve shifts right = increase in demandshifts left=decrease in demand
Demand increases and supply decreases.
  • Price: Decreases Quantity: Decreases
  • Price: Indeterminate Quantity: Decreases
  • increasing opp costs and marginal costs
  • Price: IncreasesQuantity: Indeterminate
Demand decreases and supply decreases.
  • Price: Increases Quantity: Increases
  • increasing opp costs and marginal costs
  • Price: Indeterminate Quantity: Decreases
  • Price: IncreasesQuantity: Indeterminate
movement or shift along supply curve: change in producer expectations
  • Add up quantities supplied by all individual producers for each price
  • shift
  • shift the supply curve to the right.
  • True
demand schedule
  • A change in one or more of the determinants of demand will change the demand data;demand curve shifts right = increase in demandshifts left=decrease in demand
  • A table of numbers showing the amounts of a good or service buyers are willing and able to purchase at various prices over a specified period of time.
  • sets the maximum legal price a seller may charge for a product or service. A price at or below the ceiling is legal; a price above it is not
  • A table of numbers showing the amounts of a good or service producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.
substitute good
  • one that is used together with another good
  • one that can be used in place of another good
  • a decline in income if X is an inferior good.
  • the production of any particular good in the least costly way
If the demand curve for product B shifts to the right as the price of product A declines, then:
  • a decline in income if X is an inferior good.
  • demand curve for X to the right.
  • quantity supplied exceeds quantity demanded.
  • A and B are complementary goods.
price ceiling
  • sets the maximum legal price a seller may charge for a product or service. A price at or below the ceiling is legal; a price above it is not
  • A table of numbers showing the amounts of a good or service producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.
  • a minimum price fixed by the government. A price at or above the price floor is legal; a price below it is not
  • a lower price increases the purchasing power of a buyer's money income, enabling the buyer to purchase more of the product than before
law of demand
  • As price rises, the quantity supplied rises; as price falls, the quantity supplied falls
  • A table of numbers showing the amounts of a good or service producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.
  • increase the quantity of organs available for transplant.
  • Other things equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls. In short, there is a negative or inverse relationship between price and quantity demanded
shortage
  • increasing opp costs and marginal costs
  • one that is used together with another good
  • quantity supplied < quantity demanded
  • (excess supply) quantity supplied > quantity demanded
How do you derive a market supply curve from individual supply curves?
  • amount of oranges that will be available at various prices has declined
  • quantity supplied exceeds quantity demanded.
  • Add up quantities supplied by all individual producers for each price
  • decrease equilibrium price and increase equilibrium quantity.
movement or shift along supply curve: change in technology
  • shift
  • True
  • Price: IndeterminateQuantity: Increases
  • increase in purchasing power as market price decreasesdiminishing marginal utility
price floor
  • a lower price increases the purchasing power of a buyer's money income, enabling the buyer to purchase more of the product than before
  • at a lower price buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive. The product whose price has fallen is now "a better deal" relative to the other products
  • a minimum price fixed by the government. A price at or above the price floor is legal; a price below it is not
  • the particular mix of goods and services most highly valued by society (minimum-cost production assumed)
movement or shift along supply curve: change in factor productivity
  • shift the supply curve to the right.
  • movement along curve
  • shift
  • True
A market-based system of buying and selling human organs for transplant would:
  • increase in purchasing power as market price decreasesdiminishing marginal utility
  • increasing opp costs and marginal costs
  • increase the quantity of organs available for transplant.
  • Other things equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls. In short, there is a negative or inverse relationship between price and quantity demanded
supply schedule
  • at a lower price buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive. The product whose price has fallen is now "a better deal" relative to the other products
  • sets the maximum legal price a seller may charge for a product or service. A price at or below the ceiling is legal; a price above it is not
  • quantity at which the intentions of buyers and sellers match, so that the quantity demanded and the quantity supplied are equal.
  • A table of numbers showing the amounts of a good or service producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.
movement or shift along supply curve: change in price of other goods
  • shift the supply curve to the right.
  • True
  • quantity supplied exceeds quantity demanded.
  • shift
normal goods
  • Products whose demand varies directly with money income (aka superior goods); buy more or less as income rises or falls
  • sets the maximum legal price a seller may charge for a product or service. A price at or below the ceiling is legal; a price above it is not
  • quantity at which the intentions of buyers and sellers match, so that the quantity demanded and the quantity supplied are equal.
  • movement from one point to another-from one price-quantity combo to another on fixed demand curve
equilibrium price
  • quantity at which the intentions of buyers and sellers match, so that the quantity demanded and the quantity supplied are equal.
  • sets the maximum legal price a seller may charge for a product or service. A price at or below the ceiling is legal; a price above it is not
  • movement from one point to another-from one price-quantity combo to another on fixed demand curve
  • (market clearing price) the price where the intentions of buyers and sellers match. It is the price where quantity demanded equals quantity supplied
Supply increases and demand decreases.
  • Price: Decreases Quantity: Increases
  • Price: IncreasesQuantity: Indeterminate
  • Price: Decreases Quantity: Indeterminate
  • Price: Increases Quantity: Increases
Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the:
  • Add up quantities demanded by all individual consumers for each price
  • decrease equilibrium price and increase equilibrium quantity.
  • amount of oranges that will be available at various prices has declined
  • suggest that the demand for Mustangs increased between 2007 and 2008.
demand curve
  • a minimum price fixed by the government. A price at or above the price floor is legal; a price below it is not
  • downward sloping - reflects law of demand, people buy more of a product as price falls
  • A table of numbers showing the amounts of a good or service buyers are willing and able to purchase at various prices over a specified period of time.
  • Products whose demand varies directly with money income (aka superior goods); buy more or less as income rises or falls
Demand increases and supply is constant.
  • Price: Increases Quantity: Increases
  • Price: Decreases Quantity: Indeterminate
  • shift the supply curve to the right.
  • Price: IndeterminateQuantity: Increases
movement or shift along supply curve: change in resource prices
  • a decline in income if X is an inferior good.
  • shift
  • price and quantity supplied.
  • Add up quantities demanded by all individual consumers for each price
If we say that a price is too high to clear the market, we mean that:
  • quantity supplied exceeds quantity demanded.
  • quantity supplied < quantity demanded
  • a decline in income if X is an inferior good.
  • shift the supply curve to the right.
complementary good
  • shift the supply curve to the right.
  • one that is used together with another good
  • one that can be used in place of another good
  • Price: IncreasesQuantity: Indeterminate
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