Chapter 3

Question 0

Demand

Answer 0

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

Question 1

Market

Answer 1

All of the arrangements that individuals have for exchanging with one another. Thus, for example, we can speak oft he labor market, the automobile market, and the craft market.

Question 2

Law of demand

Answer 2

The observation that there is a negative, or inverse, relationship between the price of any good or service and the quantity demanded, holding other factors constant

Question 3

Relative price

Answer 3

The money price of one commodity divided by the money price of another commodity; the number of units of one commodity that must be sacrifice to purchase one unit of another commodity

Question 4

Money price

Answer 4

The price that we observe today, expressed in today’s dollars; also called the absolute or nominal price

Question 5

Demand curve

Answer 5

A graphic representation of the demand schedule; a negatively sloped line showing the inverse relationship between the price and the quantity demanded (other things being equal)

Question 6

Market demand

Answer 6

The demand of all consumers in the marketplace for a particular good or service. The summation at each price of the quantity demanded by each individual

Question 7

Ceteris paribus conditions

Answer 7

Determinants of the relationship between price and quantity that are unchanged along a curve; changes in these factors cause the curve to shift

Question 8

Normal goods

Answer 8

Goods for which demand rises as income rises. Most goods are normal goods

Question 9

Inferior goods

Answer 9

Goods for which demand falls as income rises

Question 10

Substitutes

Answer 10

Two goods are substitutes when a change in the price of one causes a shift in demand for the other in the same direction as the price change

Question 11

Complements

Answer 11

Two goods are complements when a change in the price of one causes an opposite shift in the demand for the other

Question 12

Supply

Answer 12

A schedule showing the relationship between price and quantity supplied for a specified period of time, other things being equal

Question 13

Law of supply

Answer 13

The observation that the higher the price of a good, the more of that good sellers will make available over a specified time period, other things being equal

Question 14

Supply curve

Answer 14

The graphical representation of the supply schedule; a line (curve) showing the supply schedule, which generally slopes upward (has a positive slope), other things being equal

Question 15

Subsidy

Answer 15

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

Question 16

Market clearing or equilibrium, price

Answer 16

The price that clears the market, at which quantity demanded equals quantity supplied; the price where the demand curve intersects the supply curve

Question 17

Equilibrium

Answer 17

The situation when quantity supplied equals quantity demanded at a particular price

Question 18

Shortage

Answer 18

A situation in which quantity demanded is greater than quantity supplied at a price below the market clearing price

Question 19

Surplus

Answer 19

A situation in which quantity supplied is greater than quantity demanded at a price above the market clearing price