Chapter 3 Supply and Demand

Question 1

competitive market

Answer 1

1. many buyers and sellers
2. all pay same price
3. identical goods/services
4. free entry/exit

Question 2

change in price of subsititute

Answer 2

a fall in price of one good makes consumers less willing to buy the substitute

Question 3

change in price of complement

Answer 3

a fall in the price of one good makes people more willing to buy the other good

Question 4

normal goods

Answer 4

a rise in income increases demand

Question 5

inferior goods

Answer 5

a rise in income decreases demand