Chapter 3: Supply and Demand - Movement and Shifts of Curves

Question 1

What is a competitive market? (2)

Answer 1

• Many buyers and sellers
• same good or service

Question 2

What model shows how a competitive market works?

Answer 2

• supply and demand model

Question 3

What are the five key elements to the supply and demand?

Answer 3

• demand curve
• supply curve
• Demand and Supply curve shifts
• Market equilibrium
• Changes in the market equilibrium

Question 4

What is a demand schedule?

Answer 4

• shows how much of a good or service consumers are willing and able to buy at different prices

Question 5

What is demand the relationship of? (2)

Answer 5

• in lecture, it is the ENTIRE relationship between cost of good and quantity sold
• negative relationship

Question 6

What is a demand curve? (2)

Answer 6

• graphical representation of the demand schedule
• it shows how much of a good or service consumers want to buy at a given price

Question 7

What generally calls for an increase in demand? (2)

Answer 7

• increase in population and other factors
• rise in quantity demanded at any given price

Question 8

What is a SHIFT of the demand curve?

Answer 8

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

Question 9

What is MOVEMENT along the demand curve?

Answer 9

• change in the quantity demanded of a good that is the result of a change in that good’s price

Question 10

In the shift of a demand curve, what is a rightward shift?

Answer 10

• increase in demand
• ex. at any given price, consumers demand a larger quantity that before

Question 11

What factors cause a demand curve to shift? (6)

Answer 11

• substitutes
• complements
• Changes in income
• changes in taste
• changes in expectations
• Changes in number of consumers

Question 12

What are substitutes?

Answer 12

• two goods are substitutes if a fall in the price of one makes consumers less willing to buy the other good

Question 13

What are complements?

Answer 13

• two goods are complements if a fall in the price of one good makes people more willing to buy the other good

Question 14

What are normal goods?

Answer 14

• When a rise in incomes increases the demand for a good (normal good)

Question 15

What are inferior goods?

Answer 15

• When a rise in income decreases the demand for a good
  ex. cheap, ready to eat meals

Question 16

What is the market demand curve?

Answer 16

• horizontal sum of the individuals demand curves of all consumers in that market

Question 17

What is a supply schedule?

Answer 17

• how much of a good or service would be supplied at that price

Question 18

What is a supply curve?

Answer 18

• shows graphically how much of a good or service people are willing to sell at any given price

Question 19

What is a SHIFT of the supply curve?

Answer 19

• change in the quantity supplied of a good at any given price

Question 20

What is movement along the supply curve?

Answer 20

• change in the quantity supplied of a good that is the result of a change in that good’s price

Question 21

A decrease in supply means a ____ (rightward/leftward) shift of the supply curve. At any given price, there is a decrease in ____ supplied

Answer 21

• leftward
• quantity