Chapter 3 and Chapter 5 Appendix: Microeconomics Review

Question 1

A shift in the demand curve

Answer 1

curve is a change in the quantity demanded at any given price, represented by the shift of the original demand curve to a new position, denoted by a new demand curve.

Question 2

Movement along the demand curve

Answer 2

is a change in the quantity demanded of a good arising from a change in the good’s price.

Question 3

The five factors causing a shift in the demand curve

Answer 3

1. changes in the price of related goods or services
2. changes in income
3. changes in taste
4. changes in expectations
5. changes in the number of consumers

Question 4

substitutes

Answer 4

if a rise in the price of one of the goods leads to an increase in the demand for the other good

Question 5

complements

Answer 5

if a rise in the price of one good leads to a decrease in the demand for the other good.

Krugman, Paul; Wells, Robin (2015-04-14). Macroeconomics (Page 74). Worth Publishers. Kindle Edition.

Question 6

Normal good

Answer 6

higher income means higher demand

Question 7

inferior good

Answer 7

lower income means lower demand

Question 8

Individual Demand Curve

Answer 8

illustrates the relationship between quantity demanded and price for an individual consumer.

Question 9

quantity supplied

Answer 9

is the actual amount of a good or service people are willing to sell at some specific price.

Question 10

The five factors causing supply curve shifts

Answer 10

1. Changes in input prices
2. Changes in the prices of related goods or services
3. Changes in technology
4. Changes in expectations
5. Changes in the number of producers

Krugman, Paul; Wells, Robin (2015-04-14). Macroeconomics (Page 82). Worth Publishers. Kindle Edition.

Question 11

Changes in the price of related products

Answer 11

When a producer sells several products, the quantity of any one good it is willing to supply at any given price depends on the prices of its other co-produced goods.

Question 12

When demand decreases and supply increases, what happens to equilibrium price and quantity?

Answer 12

price decreases but quantity change is ambiguous

Question 13

When demand increases and supply decreases

Answer 13

price increases but quantity change is ambiguous

Question 14

when both supply and demand increase

Answer 14

price change is ambiguous but quantity increases

Question 15

when both supply and demand fall

Answer 15

price change is ambiguous but quantity decreases

Question 16

Individual Consumer Surplus

Answer 16

is the net gain to an individual buyer from the purchase of a good. It is equal to the difference between the buyer’s willingness to pay and the price paid.

Question 17

Total Consumer Surplus

Answer 17

surplus is the sum of the individual consumer surpluses of all the buyers of a good in a market.

Question 18

Consumer Surplus

Answer 18

is often used to refer to both individual and total consumer surplus.