ch3

Question 1

a competitive market has…

Answer 1

many buyers and sellers, same good or service

Question 2

what is the supply and demand model of

Answer 2

its a model of a competitive market

Question 3

five key elements of the supply and demand model

Answer 3

demand curve (down wards) supply curve (upwards) demand and supply curve shifts, market equilibrium point, changes in market equilibrium

Question 4

quantity demanded definition

Answer 4

total amount that consumers desire/want to purchase

Question 5

quantity bought definition

Answer 5

the actual purchase

Question 6

ceteris paribus

Answer 6

all other variables are constant and not changing

Question 7

demand schedule

Answer 7

how much of a good or service consumers will want to buy at different prices

Question 8

demand curve stuff

Answer 8

graphical representation of the demand schedule, how much of a good consumers will buy at a certain price

Question 9

causes for increase in demand

Answer 9

increase in the number of consumers (population) and a rise in the quantity demanded casing for the curve to shift to the right

Question 10

shift in demand curve

Answer 10

an increase will be to the right a decrease will be to the left

Question 11

movement along the curve

Answer 11

if the points allong the curve move but are still on the curve this is only caused by the change of quantity demanded becauses of a change in price so if the price goes down people will want a higher quantity moving the point down the curve but if the price goes up then people will want less and the point will be going up

Question 12

causes for a shift in demand curve

Answer 12

changes in price of related goods substitutes, complements. change in income causing changes in taste, expectations and number of consumers, normal and inferior goods

Question 13

substitutes

Answer 13

they fulfil the same desire / do the same thing ie coke and Pepsi if the price of the substitute falls the other goods price will fall as well

Question 14

complements

Answer 14

two goods that are consumed together ie cereal and milk a fall in price will cause people to buy more of that other good

Question 15

normal goods

Answer 15

this is stuff like name brand peanut butter a rise in consumer income causes an increase in demand

Question 16

inferior goods

Answer 16

this is like a bus ticket or no name brand peanut butter a rise in consumer income causes a decrease in the deamand

Question 17

quantity supplied

Answer 17

the amount of a product that firms want to sell, this is the amount they want to sell not the amount sold

Question 18

want variables does the quantity supplied depend on

Answer 18

products price, price inputs, price of related goods, number of suppliers, technology

Question 19

what are the price of the product and the quantity supplied related

Answer 19

positively related

Question 20

supply schedule

Answer 20

how much of a good would be supplied at different prices

Question 21

supply curve

Answer 21

positive slope and is going upwards shows how much of a good firms are willing to sell at a given price

Question 22

causes for increase in supply

Answer 22

raises in the quantity supplied at any given price cause for the raised quantity supplied can be because of new incentives from gov increase demand or new technology

Question 23

causes for shift in supply curve

Answer 23

change in price of production (factors), change in the price of related goods produced substitutes in production, complements in production, expected change in future prices, change in the number of suppliers, new tech, natural forces like weather or earthquakes that effect the supply chain

Question 24

factors of production?

Answer 24

land, labor, capital and entrepreneurship

Question 25

substitutes in production

Answer 25

can be made with the same resources ie wooden desk and door supply will increase if the substitution price falls

Question 26

complements in production

Answer 26

must be produced together ie lumber and paper the supply will increase if the price of the complement rises

Question 27

what will happen if the number of suppliers change

Answer 27

depending on if the number goes up or down the number of good produced will change

Question 28

expected change in future prices

Answer 28

change in future prices will cause the supply to shift today but holding is not accounted for example if the prices will rise in a week the supply available today will go down and will rise in a week

Question 29

technology effect on supply

Answer 29

new tech makes the supply chain more efficient boosting the production

Question 30

state of nature effect

Answer 30

natural events like weather earthquakes etc can effect the supply or production of a item in most cases not good

Question 31

individual supply curve and market supply curve

Answer 31

the market curve is the sum of all individual curves so just add up all the individual curves together

Question 32

what is market equilibrium

Answer 32

when the quantity demanded is equal to the quantity supplied. this means there is no shortage or excess no need for market price to change but doesnt mean that every one is happy

Question 33

who is happy and who is unhappy in equilibrium

Answer 33

everything to the left of the equilibrium is happy and every one to the right is unhappy

Question 34

surplus/ excess supply

Answer 34

price is above the equilibrium point. sellers are selling less goods for a higher price. demand is not equal to supply since the supply will outweigh the demand

Question 35

shortage/ excess demand

Answer 35

demand and supply aren’t equal since there is more demand then supply meaning that the seller is selling the good for too low of a price and to fix they should raise there price

Question 36

what is the buyer forced to do when the demand is below the price

Answer 36

the buyer is forced to buy less goods at a greater price