Chapter 3

Question 1

The 4 criteria for Perfect competition

Answer 1

Many buyers & sellers, All have negligible impact on market prices, firms all sell homogeneous products, and free entry/exit of market

Question 2

The Law of Demand

Answer 2

As price increases, quantity demand decreases

Question 3

Market demand

Answer 3

The sum of all individual demands

Question 4

Change in quantity demanded results in …

Answer 4

Movement along the demand curve

Question 5

Change in demand results in …

Answer 5

A shift of the demand curve

Question 6

Shift factors in consumption

Answer 6

Income, prices of related goods in consumption, # of buyers, tastes/preferences, expectations

Question 7

Normal goods

Answer 7

Are directly proportional to a shift factor

Question 8

Inferior goods

Answer 8

Are inversely proportional to shift factors

Question 9

Substitutes

Answer 9

An increase in price of one good will increase the demand of the other good

Question 10

Compliments

Answer 10

A price increase in one good will decrease demand in other good

Question 11

Law of Supply

Answer 11

When price increases, quantity of supply increases

Question 12

Market supply

Answer 12

Sum of individual firm supply curves

Question 13

Shift factors in supply

Answer 13

Input prices, prices of related goods in production (substitutes or compliments?), technology, expectations, # of sellers/firms