Chapter 3 - Supply and Demand

Question 1

Factor Market

Answer 1

Any place where factors of production (e.g. land, labor, capital) are bought and sold.

Question 2

Product Market

Answer 2

Any place where finished goods and services (products) are bought and sold.

Question 3

Opportunity Cost

Answer 3

The most desired goods or services that are foregone in order to obtain something else.

Question 4

Supply

Answer 4

The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus.

Question 5

Demand

Answer 5

The ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus.

Question 6

Demand Schedule

Answer 6

A table showing the qualities of a good consumer is willing and able to buy at alternative process in a given time period, ceteris paribus.

Question 7

Demand Curve

Answer 7

A curve describing the quantities of a good and consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus.

Question 8

Law of Demand

Answer 8

The quality of a good demanded in a given time period as its price falls, ceteris paribus.

Question 9

The determinants of market demands

Answer 9

Tastes (desire)
Income
Other goods
Expectations
Number of buyers

Question 10

Substitute Goods

Answer 10

Goods that substitute for each other; when the price of a good x rises, the demand for good increases, ceteris paribus.

Question 11

Complimentary Goods

Answer 11

Goods frequently consumed in combination; when the price of a good x rises, the demand for goods y falls, ceteris paribus.

Question 12

Changes in quality demands

Answer 12

Movements along a given demand curve in response to price change of that good.

Question 13

Changes in demand

Answer 13

shifts of the demand curve due to changes in taste, income, other goods, or expectations.

Question 14

Market Demands

Answer 14

The total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands.

Question 15

Market Supply

Answer 15

The total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period, ceteris paribus.

Question 16

Market Supply Determinants

Answer 16

Technology
Factor Cost
Other goods
Taxes and subsidies
Expectations
Number of Sellers

Question 17

Law of Supply

Answer 17

The quantity of a good supplied in a given time period increases as it’s price increases, ceteris paribus.

Question 18

Supply - Changes in quantity suppled:

Answer 18

Movements along a given supply curve.

Question 19

Supply - Changes in supply:

Answer 19

Shift of the supply curve.

Question 20

Market Mechanism

Answer 20

The use of market prices and sales to signal desired outputs (or resource allocation)

Question 21

Price Floor

Answer 21

Lower limit set for the price of a good

Question 22

Market Surplus

Answer 22

The amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply.

Question 23

Market Shortage

Answer 23

The amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand.