Chapter 3

Question 1

What is the term for what a buyer pays?

Answer 1

Price

Question 2

What does the law of demand state?

Answer 2

Price increase = Quantity demanded decrease

Question 3

Is supply the same as quantity supplied?

Answer 3

No, they are different.

Question 4

What does the law of supply state?

Answer 4

Quantity supplied increases with price

Question 5

What does the equilibrium price represent?

Answer 5

Plans of consumers and producers agree

Question 6

What do oil companies do in excess demand?

Answer 6

Raise prices

Question 7

What is the demand shift when the quantity demanded increases at every given price?

Answer 7

Rightward shift

Question 8

What causes a shift in demand?

Answer 8

Change in underlying factors

Question 9

What is the result of a shift in demand?

Answer 9

Different quantity demanded at every price.

Question 10

What happens to the demand curve with an increase in income?

Answer 10

Shifts right

Question 11

Lower costs correspond to?

Answer 11

Higher profits

Question 12

What happens when the cost of production increases?

Answer 12

Price must increase

Question 13

What do price control laws often lead to?

Answer 13

Undesirable consequences

Question 14

What is a price floor?

Answer 14

Lowest legal price

Question 15

What is deadweight loss?

Answer 15

Loss in social surplus

Question 16

What does the supply curve show?

Answer 16

Price vs. quantity supplied

Question 17

What is the basic principle of the demand and supply model?

Answer 17

Demand and supply determine price and quantity sold in markets.

Question 18

What happens to quantity demanded when price rises?

Answer 18

Decreases

Question 19

What does quantity demanded refer to?

Answer 19

A specific point on the demand curve

Question 20

What happens to quantity supplied as price rises?

Answer 20

Increases

Question 21

What is the demand shift when the quantity demanded decreases at every given price?

Answer 21

Leftward shift

Question 22

What is the effect of an increase in income on the demand for a normal good?

Answer 22

Increases

Question 23

What leads to a movement along a demand curve?

Answer 23

Change in price

Question 24

Higher costs of production lead to?

Answer 24

Lower profits

Question 25

What does a shift of supply to the right mean?

Answer 25

Higher quantity supplied at all prices

Question 26

What do you obtain by adding the cost of production and desired profit?

Answer 26

Price charged

Question 27

What factors change supply?

Answer 27

Cost of inputs, natural disasters, technology, government decisions

Question 28

Does a price change shift a demand or supply curve?

Answer 28

No

Question 29

What is a price ceiling?

Answer 29

Legal maximum price

Question 30

What is the best-known example of a price floor?

Answer 30

Minimum wage

Question 31

What are the main factors that determine what, how, and for whom goods are produced?

Answer 31

Demand and supply

Question 32

What does a demand schedule show?

Answer 32

Quantity demanded at different prices

Question 33

What happens to quantity demanded when price falls?

Answer 33

Increases

Question 34

What does the upward slope of the supply curve illustrate?

Answer 34

Law of supply

Question 35

What does equilibrium mean?

Answer 35

Balance

Question 36

What does a shift in supply indicate?

Answer 36

Change in quantity supplied

Question 37

What was the Green Revolution?

Answer 37

Breeding improved seeds

Question 38

What factors can affect demand?

Answer 38

Income, population, tastes, prices of substitutes/complements, future price expectations

Question 39

What does a demand curve show?

Answer 39

Relationship between quantity demanded and price

Question 40

What is the law of demand?

Answer 40

Inverse relationship between price and quantity demanded

Question 41

What is price in economics?

Answer 41

Amount received per unit

Question 42

What happens to quantity supplied when price increases?

Answer 42

Higher quantity supplied

Question 43

What motivates firms in terms of supply?

Answer 43

Profits

Question 44

How do government policies affect production costs?

Answer 44

Through taxes, regulations, subsidies

Question 45

What is the process to see the net effect of economic events?

Answer 45

Combine individual analyses