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Macroeconomics > Chapter 3 > Flashcards

Chapter 3 Flashcards

1
Q

Define “market” with respect to economics.

A

All of the arrangements that individuals have for exchanging with one another.

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2
Q

Define “demand.”

A

A schedule showing how much of a good or service people will purchase at any price during a specified time period with all other things being constant.

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3
Q

State the law of demand.

A

When the price of a good goes up, people buy less of it, other things being equal. When the price of a good goes down, people buy more of it, all things being equal.

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4
Q

The law of demand tells us the quantity demanded of any commodity is ______ to its price.

A

Inversely related

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5
Q

Define “relative price.”

A

The money price of one commodity divided by the money price of another commodity. Or…

The number of units of one commodity that must be sacrificed to purchase one unit of another commodity.

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6
Q

Define “money price.”

A

The price expressed in today’s dollars.

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7
Q

Choices on purchases should be weighted with respect to the _____ price.

A

Relative

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8
Q

What is the “demand curve?”

A

A graphical representation of the demand schedule.

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9
Q

The demand curve has a ______ slope.

A

Negative.

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10
Q

Define “market demand.”

A

The demand of all consumers in the marketplace for a particular good or service.

For example, the total demand for chevy pickups vs ford pickups of a particular towing class.

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11
Q

How is a market demand curve created?

A

By summing (at each price) the individual quantities demanded by all buyers in the market.

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12
Q

What are ceteris paribus conditions?

A

Conditions that can cause a given supply or demand curve to change. They are parameters that are non-price related that influence supply and demand in a free market economy.

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13
Q

Changes in ceteris paribus conditions usually cause the demand curve to _______.

A

Shift

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14
Q

What are the five commonly considered ceteris paribus conditions with respect to demand?

A
  1. Consumer income
  2. Tastes and preferences
  3. Prices of related goods
  4. Expectations regarding future prices/incomes
  5. Market size (number of potential buyers)

Christy The Parrot Eats Mangos

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15
Q

For most goods, an increase in income will lead to an ____ in demand.

A

Increase

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16
Q

A rise in demand would result in a ____ shift of the demand curve.

A

Right

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17
Q

A decrease in demand would result in a ____ shift of the demand curve.

A

Left

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18
Q

What are normal goods?

A

Goods for which the demand rises when consumer income rises.

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19
Q

Give some examples of normal goods.

A

Shoes, smartphones, wireless earbuds, etc.

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20
Q

Demand for ______ falls when income rises.

A

Inferior goods

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21
Q

Demand schedules are always drawn with the prices of all other commodities _______.

A

Held constant

22
Q

What are the two demand interdependencies?

A
  1. Those in which goods are substitutes

2. Those in which good are compliments

23
Q

For substitutes, a change in the price of a substitute will cause _______.

A

Cause an increase in demand for the substitute product.

Example: If Coke’s price goes up on campus the damnd for Pepsi will increase.

24
Q

For compliments, a change in the price of a product will cause _____.

A

A change in demand in the opposite direction for the other good.

Example: If the price of potato chips goes up, the demand for salsa will go down.

25
Q

An increase in the number of potential buyers at any given price shifts the market demand curve

A

Right or outward.

26
Q

A reduction in the number of potential buyers at any given price shifts the market demand curve ____

A

Inward or left

27
Q

What does the term “quantity demanded” mean?

A

A specific quantity at a specific price.

Note: can be represented by a single point on the demand curve.

28
Q

A change or shift of demand is represented as ______.

A

Movement or shifting of the entire demand curve.

29
Q

The only thing that can cause the entire curve to move is a change in a ________.

A

Determinant other than the goods price (CP conditions)

30
Q

A change in a good’s own price leads to a change in the quantity supplied according to ______.

A

The law of supply.

31
Q

How is a change in a goods price represented on the demand curve?

A

Movement along the curve. The curve itself does not shift.

32
Q

How is a change in any of the ceteris paribus conditions represented on a demand curve?

A

The entire curve will shift.

33
Q

Define “supply.”

A

How much of a particular good a producer will willing to give at a set price.

Note: Usually shown as a schedule showing the relationship between price and quantity supplied for a specified period of time (all other things being equal)

34
Q

State the law of supply.

A

At higher prices, a larger quantity will generally be supplied than at lower prices, all other things held constant. Inversely, at lower prices a smaller quantity will generally be supplied than at higher prices, all other things held constant.

35
Q

True or False

The law of supply is an inverse relationship.

A

False, it is a direct relationship.

36
Q

What is a “supply schedule?”

A

A schedule showing the quantity of a certain product that can be supplied with respect to given prices.

37
Q

What is a supply curve?

A

A graph of the supply schedule.

38
Q

A supply curve has a _____ slope.

A

Positive

39
Q

How is the market supply curve created?

A

By summing the individual producers’ supply curves and plotting the results.

40
Q

If something (excluding a price change) occurs that changes a producer’s willingness to create a good or service the supply curve will ______.

A

Shift

41
Q

What are the five ceteris paribus conditions of supply?

A
  1. Technology and productivity
  2. Regulations
  3. Price of resources
  4. Producers price expectations
  5. Taxes and subsidies
  6. Number of firms in the industry

Timothy Regularly Paid Paul Taxes Nightly

42
Q

If production costs fall the supply curve will ____.

A

Shift to the right

43
Q

What is a subsidy?

A

A payment to a producer from the government, usually in the form of a cash grant per unit.

44
Q

When does a given supply/demand curve shift?

A

When one of the ceteris paribus conditions change.

45
Q

When does a change occur along a supply/demand curve (no shift)?

A

When the price changes along the curve.

46
Q

A change in the price of the good in question always (and only ) brings about a change in _____ (all things being equal).

A

The quantity supplied along a given supply curve. The same can be said of the demand curve.

47
Q

Quantity supplied is represented by a given price is shown as _____.

A

A single point on the supply curve.

48
Q

What is the “market-clearing price.”

A

The price at which quantity demanded equals quantity supplied.

49
Q

Define “Equilibrium” with respect to economics.

A

The situation in which quantity supplied equals quantity demanded at a particular price.

Note: On a graph, it’s the intersection between the supply and demand curves.

50
Q

Where can the equilibrium point be found?

A

At the intersection of the supply and demand curves.

51
Q

What is a shortage?

A

A shortage is a situation in which the quantity demanded exceeds the quantity supplied at a price that somehow remains below the market-clearing price.

Macroeconomics (17 decks)

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