Chapter 3 Key Concepts

Question 1

An institution that brings many buyers and sellers together

Answer 1

Market

Question 2

A schedule or curve that shows the varying amount of a product consumers are willing and able to purchase at differing prices

Answer 2

Demand

Question 3

As the price goes up, quantity demanded declines

Answer 3

Law of Demand

Question 4

Justifications for the law of demand

Answer 4

Diminishing marginal utility and the income effect

Question 5

Number of buyers, income, tastes and preferences, price of related goods, expectations of future prices

Answer 5

Determinants of Demand

Question 6

Demand vs Quantity Demanded

Answer 6

Change in price changes quantity demanded, but not demand

Question 7

Schedule or curve showing the various amounts of a product that suppliers are willing and able to make available for sale at differing prices

Answer 7

Supply

Question 8

As price increases quantity supplied increases

Answer 8

Law of Supply

Question 9

Justifications for law of supply

Answer 9

Increased prices leads to higher potential profit and input prices increase as you produce more

Question 10

Number of sellers, costs of inputs, taxes and subsidies, technology and productivity, price expectations

Answer 10

Determinants of supply

Question 11

Supply vs Quantity Supplied

Answer 11

A change in price changes quantity supplied but not supply

Question 12

Surpluses and Shortages cause people to bid the prices up or down leading to Quantity Supplied = Quantity Demanded

Answer 12

Equilibrium