A1-6 Exam Review

Question 1

what is demand?

Answer 1

the willingness and ability to purchase a good

Question 2

what is quantity demanded?

Answer 2

the amount of a good purchased at a specific rate

Question 3

what is a demand schedule?

Answer 3

a chart that indicates the Qd at various prices

Question 4

what is the demand curve?

Answer 4

a graphical representation of a demand schedule

Question 5

Define the Law of Demand

Answer 5

P↑ Qd ↓ and P↓ Qd ↑

Question 6

how does a movement along the demand curve occur?

Answer 6

when a change in the PRICE of the good happens

Question 7

how does shift in the demand curve occur?

Answer 7

when DEMAND changes even though the price stays the same

Question 8

what are the 5 demand shift factors?

Answer 8

1. income
2. consumer preferences
3. prices of related goods
4. consumer expectations
5. number of buyers

Question 9

what are the 9 supply shift factors?

Answer 9

1. cost of inputs
2. technology
3. government taxes
4. government subsidies
5. government import restrictions
6. government regulations
7. number of sellers
8. prices of alternatives
9. expectations of future prices

Question 10

when the price of inputs (resources) increases, the ___ of the goods that are produced with those inputs decreases

Answer 10

cost of inputs; supply

Question 11

when a supplier sells two goods, good A and good B and the price of good A increase, the ____ of good B decreases.

Answer 11

prices of production alternatives; supply

Question 12

when the number of buyers changes, people will buy more or less of goods in that area even though the price didn’t change.

Answer 12

number of buyers; demand

Question 13

when producers expect the price of goods to fall in the future, the current goods increase

Answer 13

expectations of future prices; supply

Question 14

when a person’s tastes change they buy more or less of a good even though the price of that goo didn’t change

Answer 14

consumer preferences; demand

Question 15

goods that people buy more of when their income increases and less of when their income decreases.

Answer 15

income - normal good; demand

Question 16

goods that people buy the same amount of when their income increases or decreases.

Answer 16

income - neutral; demand

Question 17

goods that people buy less of when their income increases and more of when their income decreases

Answer 17

income- inferior; demand

Question 18

when there is an advancement in the technology used to produce goods, the supply of those goods will increase

Answer 18

technology; supply

Question 19

when consumers expect something to occur in the future, they will buy more or less of a good been though the price didn’t change

Answer 19

consumer expectations; demand

Question 20

when the government taxes a producer for producing a good, the supply of that good decreases

Answer 20

government taxes; supply

Question 21

when the government initiates a subsidy for the production of a food, the supply of that good increases

Answer 21

government subsides; supply

Question 22

when the government regulates the production of a good, the supply of that good decreases

Answer 22

government regulation; supply

Question 23

when the government restricts imported goods from a country, the supply of those goods decreases

Answer 23

government import restrictions (quota); supply

Question 24

when the price of a substitute increases, people will buy more of the original good

Answer 24

prices of related goods - substitutes; demand

Question 25

when the price of a complement increases, people will buy less of the original good

Answer 25

prices of related goods - complements; demand

Question 26

when there are more sellers of a particular good, the supply of that good increases

Answer 26

number of sellers; supply

Question 27

define inelastic demand

Answer 27

when an increase in price results in a small decrease in QD

Question 28

define elastic demand

Answer 28

when an increase in price results in a large decrease in QD

Question 29

A= inelastic // B= elastic 1. no or very few substitutes?

Answer 29

A

Question 30

A= inelastic // B= elastic 2. necessities?

Answer 30

A

Question 31

A= inelastic // B= elastic 3. many substitutes?

Answer 31

B

Question 32

A= inelastic // B= elastic 4. small % of income spent on good?

Answer 32

A

Question 33

A= inelastic // B= elastic 5. luxuries?

Answer 33

B

Question 34

A= inelastic // B= elastic 6. large % of income spent on good?

Answer 34

B

Question 35

A= inelastic // B= elastic 7. a lot of time to adapt to price changes?

Answer 35

B

Question 36

A= inelastic // B= elastic 8. very little time to adapt to price changes?

Answer 36

A

Question 37

what is supply?

Answer 37

the willingness and ability of a producer to produce and sell a good

Question 38

what is quantity supplied?

Answer 38

the amount of a good that is supplied at a certain price

Question 39

what is supply schedule?

Answer 39

a chart that indicates the QS at various prices

Question 40

what is supply curve?

Answer 40

a graphical representation of a supply schedule

Question 41

what is the law of supply?

Answer 41

P↑ Qd ↑ and P↓ Qd ↓

Question 42

an economic situation in which no one would be better off doing something different

Answer 42

equilibrium

Question 43

define what "the price where quantity supplied and quantity demanded are equal"

Answer 43

equilibrium price

Question 44

how does a society have a shortage?

Answer 44

when the quantity demanded is larger than the quantity supplied (below equilibrium)

Question 45

how does a society have a surplus?

Answer 45

when the quantity supplied is larger than the quantity demanded (above equilibrium)

Question 46

the difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually do pay

Answer 46

consumer surplus

Question 47

the difference between the total amount that producers receive and the minimum amount they are willing to accept for a good.

Answer 47

producer surplus

Question 48

a state of the economy in which production represents consumer preference. (MC=MB)

Answer 48

allocative efficiency

Question 49

what do price ceilings do?

Answer 49

limits on how high a price is charged for a product. MUST be lower than the equilibrium price

Question 50

what do price floors do?

Answer 50

limits on how low a price is charged for a product. MUST be higher than the equilibrium price

Question 51

what does it mean when the text says, "loss of economic efficiency that can occur when equilibrium for a good or service is not achieved or is not achievable"?

Answer 51

dead-weight loss

Question 52

which way does the supply curve shift when a tax imposed?

Answer 52

Left