CH 3 & 4 HW Flashcards
HW
The law of demand posits _____ relationship between the quantity demanded of a good and its price, other things being equal.
The law of _____ applies when other things, such as income and the prices of all other goods and services, are held constant. We measure the demand schedule in terms of a time dimension and in constant-quality units.
The _____ curve is derived by summing the quantity demanded by individuals at each price.
an inverse
demand
market demand
Consider the following cases.
a. If the price of bacon rises, and as a result the demand for sausage increases, this implies that these two goods are _____.
b. If the price of tennis racquets falls, and as a result the demand for tennis balls _____ , this implies that these two goods are complements LOADING….
c. If the price of coffee rises, and as a result the demand for sugar falls, this implies that these two goods are _____
d. If the price of automobiles _____, and as a result the demand for motorbikes falls, this implies that these two goods are substitutes LOADING….
substitutes
increases
complements
falls
Identify which of the following would generate an increase in the market demand for tablet devices, which are a normal good.
I. A decrease in the incomes of consumers of tablet devices.
II. An increase in the price of ultrathin computers, which are substitutes.
III. An increase in the price of online apps, which are complements.
IV. An increase in the number of consumers in the market for tablet devices.
both II and IV
Demand curves are drawn with determinants other than the price of the good held constant. These other determinants, called ceteris paribus conditions, are (1)
_____, (2) _____, (3) _____, (4) _____, and (5) _____
A change in demand comes about only because of a change in the _____ conditions of demand. This change in demand is a shift in the demand curve to the left or to the right.
A change in the quantity demanded comes about when there is a change in the price of the good (other things held constant). Such a change in quantity demanded involves a _____ a given demand curve.
- income
- tastes and preferences
- prices of related goods
- expectations about future prices and incomes
- the number of potential buyers in the market
at any given price. If any one of these determinants
changes, the demand curve will shift to the right or to
the left.
ceteris paribus
movement along
The law of supply states that there is a positive relationship between the price and the quantity supplied.
Thus, as the price increases, _____
According to the law of supply, as the price of the good increases, it causes
the quantity produced by firms increases.
a movement upward along the supply curve.
The law of supply states that there is a positive
relationship between the price and the quantity supplied
.
Thus, as the price increases, the
According to the law of supply, as the price of the good increases, it causes a
quantity supplied by firms increases
movement upward along the supply curve.
There is normally _____ relationship between price and quantity of a good supplied, other things held constant.
The _____ curve normally shows a direct relationship between price and quantity supplied.
The _____ curve is obtained by horizontally adding individual supply curves in the market.
a direct
supply
market supply
Which of the following will cause an outward (rightward) shift in supply?
A technological improvement.
Suppose that paper is necessary to produce books. If the price of paper rises, the supply curve of
books shifts to the left
A change in a good’s own price leads to a change in supply, which shifts the supply curve. (T / F)
Whenever there is a change in a ceteris paribus condition there will be a change in ________, which is represented by a ________.
False
supply; shift in the entire supply curve
At the market price of $8, the quantity demanded is
_____ units, and quantity supplied is _____ units.
At this price, _____ exists.
At a market price of $4, _____ now exists.
The market equilibrium exists at a price of $ _____.
In equilibrium, the quantity demanded by consumers is
_____ to the quantity supplied by producers.
20; 60
a surplus
a shortage
6
equal to
The following table gives the demand and supply schedules for gizmos.
Price Quantity Quantity
Demanded Supplied
$35 190 280
$30 210 270
$25 230 260
$20 250 250
$15 270 240
The equilibrium price in this market is $ _____.
The equilibrium quantity in this market is _____ units.
If the price in this market was $30, there would be a
_____ of _____units.
20
250
surplus; 60
Shortages and scarcity are the same thing.
A shortage occurs when quantity demanded is ________ than quantity supplied at a price ________ the market clearing price.
False
greater; below
In a price system,
relative prices change constantly to reflect changes in supply and demand.
A key feature of the _____ system is _____ exchange, which involves trades between individuals that they both perceive to raise their well-being.
_____, also known as intermediaries, specialize in linking ultimate sellers and buyers and lowering these parties’
_____ costs.
price; voluntary
Middlemen; transaction
Suppose that you are investigating the market for aluminum. The price of steel, a substitute good, has decreased. Which of the following would best describe the market reaction to this event?
The demand for aluminum decreases, which creates a surplus of aluminum, causing the price of aluminum to decrease.
Other things remaining equal, a decrease in the world oil supply like those that occurred in 1973-74 and 1979 would
increase the price of airline travel and decrease its equilibrium quantity.
If demand increases while supply remains unchanged, the equilibrium price of the product will ________ and the equilibrium quantity will ________.
increase; increase
Given the existence of relative scarcity, resources can be rationed by
All of the above
The following table depicts the quantity demanded and quantity supplied of one-bedroom apartments in a small college town.
Monthly Quantity Quantity
Demanded Supplied
$400 3,000 1,600
$450 2,500 1,800
$500 2,000 2,000
$550 1,500 2,200
$600 1,000 2,400
The market price will be $_____ and the equilibrium quantity will be _____ apartments.
If this town imposes a rent control of $450 per month, how many apartments are rented? _____.
500
2000
1800
Many U.S. cities, especially those with large populations of renters, have rent controls.
Suppose that New York City sets a rent control of $400 per month on one-bedroom apartments. The graph on the right shows this situation.
The rent control will create a ______ of apartments equal to _____.
The price of apartments would be $ _____ if there was no rent control. With the rent control, the implicit or black market price is likely to be _____.
shortage; (Qd - Qs)
700; around $1000
A black market is a market in which a price-controlled good is sold at an illegally high price. (T / F)
As long as a price ceiling is ________ the market clearing price, imposing a price ceiling creates a ________.
True
below; shortage
In advance of the recent increase in the U.S. minimum wage rate, the government of the state of Arizona decided to boost its own minimum wage by $1.60 per hour. This pushed the wage rate earned by Arizona teenagers above the equilibrium wage rate in the teen labor market. What is the predicted effect of this action by Arizona’s government on each of the following?
The quantity of labor supplied by Arizona teenagers will
_____.
The quantity of labor demanded by employers of Arizona teenagers will _____.
The number of unemployed Arizona teenagers in this city will _____
increase
decrease
increase
What is the economic effect of price floors?
Surpluse
The accompanying graph depicts the market for unskilled labor. With the market initially in equilibrium, let a minimum wage be set at $8 per hour. The amount of unemployment is now
40,000 hours of labor.
