Chapter 3

Question 1

A function that shows the quantity demanded at different prices.

Answer 1

Demand Curve

Question 2

The quantity that buyers are willing and able to buy at a particular price.

Answer 2

Quantity Demanded

Question 3

A demand curve can be red: At a given price, how much are people willing to buy?

Answer 3

Horizontally

Question 4

A demand curve can be read: What are people willing to pay for a given quantity?

Answer 4

Vertically

Question 5

A demand curve is __________ sloped.

Answer 5

Negatively

Question 6

The lower the price, the _______ the quantity demanded.

Answer 6

greater

Question 7

Consumers gain from exchange; difference between the maximum price a consumer is willing to pay for a certain quantity and the market price.

Answer 7

Consumer Surplus

Question 8

The areas beneath the demand curve and the above price

Answer 8

Total consumer surplus

Question 9

An increase in demand shifts the demand curve to the _____.

Answer 9

Right

Question 10

Decrease in demand shifts the demand curve to the _______.

Answer 10

Left

Question 11

Factors that shift demand curve. (6)

Answer 11

Income, population, price of substitutes, price of complements, expectations, tastes

Question 12

When an increase in income increases the demand for a good, it is ____________

Answer 12

a normal good

Question 13

When an increase in income decreases the demand for a good, it is ___________

Answer 13

An inferior good

Question 14

Higher incomes increase demand for a normal good, shifting the demand curve to the ________

Answer 14

right

Question 15

An increase in population will _________ demand generally.

Answer 15

increase

Question 16

A good that can be consumed instead of another good

Answer 16

Substitute

Question 17

Things that go well together

Answer 17

Complements

Question 18

The _______ of a reduction in future supply increases the demand today.

Answer 18

Expectations

Question 19

Changes in _________ of a reduction in future supply increase the demand today.

Answer 19

Tastes

Question 20

A function that shows the quantity supplied at different prices

Answer 20

Supply curve

Question 21

The quantity that sellers are willing and able to sell at a particular price

Answer 21

Quantity supplied

Question 22

The producers gain from exchange, or the difference between the market price and the minimum price at which a producer would be willing to sell a particular quantity

Answer 22

Producers Surplus

Question 23

The area above the supply curve and below the price.

Answer 23

Total producer surplus

Question 24

Increase in supply shifts the supply curve to the ____

Answer 24

right

Question 25

Decrease in supply shifts the supply curve to the ___

Answer 25

Left

Question 26

Factors that shit supply: (5)

Answer 26

Technological innovations and changes in the price of inputs, taxes and subsidies, expectations, entry or exit of producers, changes in opportunity costs

Question 27

Improvements in technology can reduce costs and thus ____________ suppy

Answer 27

increase

Question 28

A ______ on output has the same effect as an increase in costs

Answer 28

tax

Question 29

A ______ is the reverse of a tax

Answer 29

subsidy

Question 30

The expectations of a future price increase, therefore, ____________ the current supply.

Answer 30

decreases

Question 31

In expectations supply curve shifts to the ______

Answer 31

Left

Question 32

The entry of new producers increases supply, shifting the curve _________ and to the ______

Answer 32

down, right

Question 33

An increase in opportunity costs shifts the supply curve _________ and to the _________

Answer 33

up, left

Question 34

If the price of wheat increases, the opportunity cost of growing soybeans _________

Answer 34

increases

Question 35

Suppose a new technology reduces the time it takes to assemble a car. How would this affect the supply of cars

Answer 35

It would shift the supply curve to the right