4 MT

Question 1

market price

Answer 1

the price at which goods can be sold in an open market with many potential sellers and buyers

Question 2

marginal utility

Answer 2

the amount of satisfaction resulting from a one unit increase of a product

Question 3

total utility

Answer 3

the total amount of satisfaction received form possessing a certain amount of a good

Question 4

law of demand

Answer 4

the free market principle stating that as the price of a good increases the quantity demanded decreases, assuming all other factors remain equal; as the price of a good falls, the quantity demanded rises

Question 5

law of supply

Answer 5

the free market principle stating that as the price of a good increases the quantity supplied also increases, assuming all other factors remain equal; as the price of a good falls, the quantity supplied also falls

Question 6

demand schedule

Answer 6

a list of numbers that compares price with quantity demanded

Question 7

supply schedule

Answer 7

a list of numbers that compares price with quantity

Question 8

demand curve

Answer 8

a graphic representation of the quantity of goods purchased at different prices within a specified amount of time; slopes downward and to the right

Question 9

supply curve

Answer 9

a graphic representation of the quantity of goods supplied at different prices within a specified amount of time; slopes upward and to the right

Question 10

normal good

Answer 10

a good whose demand is directly related to consumer’s incomes

Question 11

inferior good

Answer 11

a good whose demand decreases when consumer incomes increase

Question 12

substitute good

Answer 12

a good capable of being used in place of another good

Question 13

complementary good

Answer 13

a good often used in conjunction with another

Question 14

subsides

Answer 14

monetary assistance given by government to businesses to encourage production

Question 15

equilibrium

Answer 15

the point at which quantity supplied and quantity demanded are equal

Question 16

shortage

Answer 16

a situation in which the quantity demanded exceeds the quantity supplied at a given price

Question 17

surplus

Answer 17

a situation in which the quantity supplied exceeds the quantity demanded at a given price

Question 18

price ceiling

Answer 18

a limit that the government places on how high a producer may charge for his product; price set below equilibrium price

Question 19

price floor

Answer 19

a limit that the government places on how low a producer may charge for his product; price set above equilibrium price

Question 20

value in use

Answer 20

value that is directly related to the benefits their owners receive through their use

Question 21

The Dedham Farmer and Boston Merchant Bargain

Answer 21

In this story, a Dedham farmer with wooden boards that don’t hold much value to him traded with a man who owned 50 barrels of molasses and was in need of wood to expand hi warehouse. This story illustrates the idea that we place values on goods based upon our personal preferences and circumstances, as well as how much of the goods we already have

Question 22

value in exchange

Answer 22

what a particular good is worth in exchange for some other good; also known as trading value

Question 23

to know if demand for an item is high or low

Answer 23

we must be able to show the amount bought over a length of time

Question 24

changes in demand

Answer 24

1. tastes and preferences
2. income
3. population
4. prices of related goods
5. consumer expectations

Question 25

changes in supply

Answer 25

1. technology
2. resource prices
3. prices of related goods
4. number of sellers
5. producer expectation
6. government taxes, subsides, and regulations

Question 26

demand is elastic (price elasticity of demand)

Answer 26

if prices go up, people will buy less

Question 27

elasticity

Answer 27

the responsiveness of the quantity supplied or the quantity demanded to change in a good’s price

Question 28

inelastic

Answer 28

demand for a good is inelastic when consumers will pay very high price for a particular commodity because they feel there are no other substitutes

Question 29

substitution effect

Answer 29

the principle stating that people tend to substitute less expensive goods for goods whose prices have risen

Question 30

high lord of the market place

Answer 30

illustrates that a central power controlling the market place results in an unsuccessful economy