CH-3

Question 1

Define: Factor Markets

Answer 1

Any place where factors of production (e.g., land, labor, capital) are bought and sold.

Question 2

Define: product Markets

Answer 2

Any place where finished goods and services (products) are bought and sold.

Question 3

Define: Opportunity cost*

Answer 3

The most desired goods or services that are forgone in order to obtain something else.

Question 4

Define: Supply*

Answer 4

The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus.

Question 5

Definre: Demand*

Answer 5

The willingness and ability to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus.

Question 6

Demand Curve

Answer 6

A curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus. (graphical illustration of demand schedule)

Question 7

Law of Demand

Answer 7

The QUANTITY of a good demanded in a given time period increases as its price falls, ceteris paribus. (As price falls the quantity demand increases.)

Question 8

Name 5 determinants of market demand

Answer 8

Taste (desire for good), Income, Other goods (their availability and price) , Expectation (for income, prices, taste), number of buyers.

Question 9

Substitute Goods

Answer 9

Goods that substitute for each other; when the price of good x rises, the demand for good y increases, ceteris paribus.

Question 10

Shift in Demand

Answer 10

A change in the quantity demanded at any (every) price.

Question 11

Change in Quantity of Demand (movements)

Answer 11

Movements along a given demand curve in response to price changes of that good

Question 12

Ganges in Demand (Shifts)

Answer 12

Shifts of the demand curve due to changes in determinants (taste, income, other goods, expectation)

Question 13

Market Demand

Answer 13

The total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands. (Market vs Individual)

Question 14

Market Supply

Answer 14

The total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period, ceteris paribus.

Question 14

Determinants of Market Suply

Answer 14

Technology, Factor Costs, Other Goods, Taxes and Subsidies, expectations, number of sellers

Question 14

Law of Supply

Answer 14

The quantity of a good supplied in a given time period increases as its price increases, ceteris paribus.

Question 15

Market supply curve

Answer 15

Summery of the supply intentions of all individual producers

Question 16

Changes in Quantity Supplied (Movements)

Answer 16

Movements along a given supply curve in response to price changes of that good

Question 17

Changes in Supply (Shifts)

Answer 17

Shifts of supply curve due to changes in Technology, factor costs, other goods, taxes and subsidies, ecxpectations.

Question 18

Equilibrium (price)

Answer 18

Quantity demanded = Quantity supplied

Question 19

Price Floor

Answer 19

Lower limit set for the price of a good.

Question 20

Market Surplus

Answer 20

The amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply.

Question 21

Market Shortage

Answer 21

The amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand.

Question 22

Price Ceiling

Answer 22

An upper limit imposed on the price of a good.

Question 23

*Factor Markets

Answer 23

Any place where factors of production (e.g., land, labor, capital) are bought and sold.

Question 24

*Product Markets

Answer 24

Any place where finished goods and services (products) are bought and sold.

Question 25

Demand Curve*

Answer 25

A curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus.

Question 26

Law of Demand*

Answer 26

The quantity of a good demanded in a given time period increases as its price falls, ceteris paribus

Question 27

Determinants of Demand*

Answer 27

Taste, Income, Other goods, Expectations, # of buyers

Question 28

Substitute Goods*

Answer 28

Goods that substitute for each other; when the price of good x rises, the demand for good y increases, ceteris paribus.( Pepsi for Coke)

Question 29

Complementary Goods*

Answer 29

Goods frequently consumed in combination; when the price of good x rises, the demand for good y falls, ceteris paribus.(Cars and gasoline)

Question 30

Demand (Movement Vs. Shifts)

Answer 30

Movements along a demand curve, referred to as a change in quantity demanded, are a response to price changes for that good. Shifts of the demand curve, referred to as changes in demand, occur when the determinants of demand change.

Question 31

Law Of Supply*

Answer 31

The quantity of a good supplied in a given time period increases as its price increases, ceteris paribus. The supply curve is upward-sloping to the right.

Question 32

DETERMINANTS of Market Supply*

Answer 32

1. Technology
2. Factor Costs
3. Other goods
4. Taxes and subsidies
5. Expectations
6. # of Sellers

Question 33

Shifts of Supply *

Answer 33

1. Changes in the quantity supplied are referred to as movements along the supply curve.
2. Changes in supply are referred to as shifts in the supply curve.

• Increase in supply is a rightward shift.
• Decrease in the supply is a leftward shift.

Question 34

Equilibrium*

Answer 34

The price at which the quantity of a good demanded in a given time period equals the quantity supplied

Question 35

Market Surplus *

Answer 35

The amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply.

Question 36

Price Floor*

Answer 36

Lower limit set for the price of goods

Question 37

Market Shortage*

Answer 37

The amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand.