Ch 3: The Market at Work

Question 1

market economy

Answer 1

a limited to goverment-free market where buyers and sellers can trade goods and services p72

Question 2

invisible hand

Answer 2

refers to adam smith’s observation that the market will produce goods that are highly valued by the consumers. p72

Question 3

competitive market

Answer 3

too many buyers/sellers that they have low to no impact on price and goods produced p73

Question 4

imperfect market

Answer 4

when one buyer/seller can control the market price p74

Question 5

market power

Answer 5

a producers ability to control the demand and /or supply so they can control the price of produced good p74

Question 6

monopoly

Answer 6

when one producer supplies a good for the entire market p75

Question 7

quantity demanded

Answer 7

the quantity the buyers are willing to buy a good based on market price p76

Question 8

law of demand

Answer 8

Price go up; quantity demand goes down

Price goes down; quantity demanded goes up

Question 9

demand schedule

Answer 9

a table that shows the negative correlation of quantity demanded and the price of good

Question 10

demand curve

Answer 10

a graph that shows the negative correlation of quantity demanded and the price of good

Question 11

market demand

Answer 11

by adding all the buyers quantity demanded of a good you can get the market demand p77

Question 12

purchasing power

Answer 12

Less money you have, less quantity you demand. p80

Question 13

normal good

Answer 13

a good that has a positive correlation between the relationship of buyer’s income and shift of quantity demanded

Question 14

inferior good

Answer 14

a good that is not a luxury of choice, but of need. Canlis vs wendys

Question 15

complements

Answer 15

goods that work in tandem (together) p81

Price goes up, shift left demand for complementary goods

Question 16

substitutes

Answer 16

goods that can be substituted by another good.

Price goes up, shift right demand for alternative good

Question 17

quantity supplied

Answer 17

the quantity the producers are willing to supply of a good, based on the market price.

Question 18

law of supply

Answer 18

Price go up; supplies go up

Price go down; supplies go down

Question 19

supply schedule

Answer 19

a table that shows the positive correlation between market price of good and quantity supplied

Question 20

supply curve

Answer 20

a graph that shows the relationship between the price in the supply schedule and the quantity supplied at those prices p85

Question 21

market supply

Answer 21

by adding up all quantity supplied of a good, you get the market supply p87

Question 22

inputs

Answer 22

components that help produce in the system of production. Ex) raw materials, worker, building

Question 23

subsidy

Answer 23

when government aids in money for production of a good so supply of a good shift right and the price of said good goes down for more consumption

Question 24

equilibrium price

Answer 24

price in which demand curve and supply curve intersect. Ideal price for the market

Question 25

equilibrium quantity

Answer 25

the quantity supplied meets the quantity demanded

Question 26

law of supply and demand

Answer 26

price will adjust so quantity supplied and quantity demanded meet equilibrium P95

Question 27

shortage

Answer 27

(excess demand) when there is more demand than supplies of a good in the market. Price needs to go up

Question 28

surplus

Answer 28

(excess supply) when there is more supply than demand of a good in the market. Price needs to go down.

Question 29

equilibrium

Answer 29

when demand curve and supply curve intersect and are in balance

Question 30

5 determinants (shifters) of demand

Answer 30

1: Taste and preference
2: Number of consumers
3: Price of related goods
4: Income
5: Future expectations

Question 31

5 determinants (shifters) of supply

Answer 31

1: Price/ availability of inputs( resources)
2: Number of sellers
3: Technology
4: Taxes and subsidies (Gov action)
5: Expectation of future profits