Chapter 3 Flashcards
What is the term for what a buyer pays?
Price
What does the law of demand state?
Price increase = Quantity demanded decrease
Is supply the same as quantity supplied?
No, they are different.
What does the law of supply state?
Quantity supplied increases with price
What does the equilibrium price represent?
Plans of consumers and producers agree
What do oil companies do in excess demand?
Raise prices
What is the demand shift when the quantity demanded increases at every given price?
Rightward shift
What causes a shift in demand?
Change in underlying factors
What is the result of a shift in demand?
Different quantity demanded at every price.
What happens to the demand curve with an increase in income?
Shifts right
Lower costs correspond to?
Higher profits
What happens when the cost of production increases?
Price must increase
What do price control laws often lead to?
Undesirable consequences
What is a price floor?
Lowest legal price
What is deadweight loss?
Loss in social surplus
What does the supply curve show?
Price vs. quantity supplied
What is the basic principle of the demand and supply model?
Demand and supply determine price and quantity sold in markets.
What happens to quantity demanded when price rises?
Decreases
What does quantity demanded refer to?
A specific point on the demand curve
What happens to quantity supplied as price rises?
Increases
What is the demand shift when the quantity demanded decreases at every given price?
Leftward shift
What is the effect of an increase in income on the demand for a normal good?
Increases
What leads to a movement along a demand curve?
Change in price
Higher costs of production lead to?
Lower profits
What does a shift of supply to the right mean?
Higher quantity supplied at all prices
What do you obtain by adding the cost of production and desired profit?
Price charged
What factors change supply?
Cost of inputs, natural disasters, technology, government decisions
Does a price change shift a demand or supply curve?
No
What is a price ceiling?
Legal maximum price
What is the best-known example of a price floor?
Minimum wage
What are the main factors that determine what, how, and for whom goods are produced?
Demand and supply
What does a demand schedule show?
Quantity demanded at different prices
What happens to quantity demanded when price falls?
Increases
What does the upward slope of the supply curve illustrate?
Law of supply
What does equilibrium mean?
Balance
What does a shift in supply indicate?
Change in quantity supplied
What was the Green Revolution?
Breeding improved seeds
What factors can affect demand?
Income, population, tastes, prices of substitutes/complements, future price expectations
What does a demand curve show?
Relationship between quantity demanded and price
What is the law of demand?
Inverse relationship between price and quantity demanded
What is price in economics?
Amount received per unit
What happens to quantity supplied when price increases?
Higher quantity supplied
What motivates firms in terms of supply?
Profits
How do government policies affect production costs?
Through taxes, regulations, subsidies
What is the process to see the net effect of economic events?
Combine individual analyses
