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ECON 3411 > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

Market

A

consists of buyers and sellers of a good or service

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2
Q

Real Price of a Product

A

price relative to the prices of other goods and services

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3
Q

Horizontal Interpretation of the demand curve

A

start with price on the vertical axis and read the corresponding quantity demanded on the horizontal axis

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4
Q

Vertical Interpretation of the demand curve

A

start with quantity on the horizontal axis and then read the marginal buyer’s reservation price on the vertical axis

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5
Q

Law of Demand

A

All things being equal, when the price of a product falls, people demand larger quantities of it.

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6
Q

Law of Supply

A

When the price of a product rises, firms offer more of it for sale

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7
Q

Equilibrium Quantity

A

quantity demanded of an item at the point of economic equilibrium

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8
Q

Equilibrium Price

A

quantity supplied of an item at the point of economic equilibrium

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9
Q

Price Ceiling

A

level above which the price of a good is not permitted by law to rise

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10
Q

Example of price ceiling

A

rent control

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11
Q

Price Floors

A

minimum price for a good, established by law, and supported by government’s offer to buy the good at that price

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12
Q

Price Floors

A

minimum price for a good, established by law, and supported by government’s offer to buy the good at that price

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13
Q

Functions of Price

A

rationing and allocating

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14
Q

Determinants of Demand

A 
Income
Tastes
Prices of Substitutes/Complements
Expectations
Population
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15
Q

Determinants of Supply

A 
Technology
Factor Prices
Number of Suppliers
Expectations
Weather
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16
Q

An increase in demand will lead to a

A

increase in both the equilibrium price and quantity

17
Q

A decrease in demand will lead to a

A

decrease in both the equilibrium price and quantity

18
Q

What does a demand curve show the relationship between?

A

Between each possible price and the amount of a product that a potential buyer would wish to purchase

19
Q

When the price of a product is on the y-axis of a graph and the quantity supplied by sellers is on the x-axis, what is most typically true about the slope of a supply curve?

A

the supply curve is typically upward sloping

20
Q

Consequences of Rent Control

A

Deteriorating housing quality
exorbitant fees
misallocation of house resources

21
Q

The imposition of a price floor causes the aggregate surplus in a market to

A

decrease

22
Q

At any price other than the equilibrium price, one side of the market or the other is

A

dissastisfied

23
Q

The use of a price support program to increase the price of a good causes consumer surplus to

A

decrease

24
Q

Why do supply curves tend to slope upward?

A

sellers tend to want to sell more of a product at a higher price

ECON 3411 (9 decks)

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