Chapter 3: The Market Forces of Supply Flashcards
the claim that the quantity supplied of a good rises (falls) when the price of the good rises (falls), other things equal
Law of Supply
states that there is a positive relationship between price and quantity of a good supplied.
Law of Supply
is the willingness and ability of sellers to supply goods or services at a particular price.
Supply
of any good is the amount that sellers are willing and able to sell.
Quantity of supplied
A table that shows the relationship between the price of a good and the quantity supplied.
Supply schedule
Is a graph illustrating how much of a product a firm will supply at different prices.
Supply curve
a movement along the supplied curve caused by a change in the price of the good itself.
Change in Quantity Supplied
shows how price affects quantity supplied, other things being equal.
Supply Curve
True or False
A fall in input prices makes production more profitable at each output price, so firms supply a larger quantity at each price, and the S curve shifts to the left.
False
A fall in input prices makes production more profitable at each output price, so firms supply a larger quantity at each price, and the S curve shifts to the right.
8 Factors affecting of supply
- Input Prices
- # of sellers
- Technology
- Price Expected
- Price of Related Goods
- Taxes
- Subsidies
- Weather & Season
True or False
A cost-saving technological improvement has the same effect as a fall in input prices, and shifts S curve to the left.
False
Correct:
A cost-saving technological improvement has the same effect as a fall in input prices, and shifts S curve to the right.
True or False
Advances in technology reduce the number of inputs needed to produce a given supply of goods.
True
True or False
An increase in the number of sellers increases the quantity supplied at each price and shifts S curve to the right.
True
True or False
If suppliers expect prices to fall in the future, they may store today’s supply to reap higher profits later (If good is not perishable)
False
If price of a ____________ in production of good X rises (falls), supply of good X falls (rises)
substitute
If price of a ____________ in production of good X rises (falls), supply of good X rises (falls)
complement
True or False
When taxes go up, costs go up, and profits go down, leading suppliers to reduce output.
True
True
When government subsidies go down, costs go up, and profits go down, leading suppliers to decrease output
True
True or False
During bad weather, supply falls and during good weather supply rises.
True
True or False
Supply rises during peak seasons, and supply falls during off-peak seasons
True
A rightward or leftward shift in the supply curve caused by changes in the factors/variables affecting supply
Change in Supply
is the condition that exists when quantity supplied and quantity demanded are equal.
Market Equilibrium
True or False
The operation of the market does not depends on the interaction between buyers and sellers.
False
Correct:
The operation of the market depends on the interaction between buyers and sellers.
True or False
At equilibrium, there is a tendency for the market price to change.
False
Correct:
At equilibrium, there is no tendency for the market price to change.
The price that equates quantity supplied with quantity demanded.
Equilibrium Price
The quantity supplied and quantity demanded at the equilibrium price
Equilibrium Quantity
the condition that exists when quantity supplied exceeds quantity demanded at the current price.
Market Surplus
When quantity supplied exceeds quantity demanded, price tends to fall until equilibrium is restored.
Market Surplus
When quantity supplied is greater than quantity demanded
Surplus
the condition that exists when quantity demanded exceeds quantity supplied at the current price.
Market Shortage
When quantity demanded exceeds quantity supplied, price tends to rise until equilibrium is restored.
Market Shortage
Legal restrictions on how high or low a market price may go.
Price Controls
Are usually enacted when policymakers believe the market price is unfair to buyers or sellers.
Price Controls
2 Kinds of Controls
- Price Ceilings
- Price Floor
a maximum price sellers are allowed to charge for a good.
Price Ceilings
a minimum price buyers are required to pay for a good.
Price Floors
It is a lower limit for the price
Price Floors
It is an upper limit for the price.
Price Ceilings
is a __________ constraint on the market, creating Shortages.
binding Price Ceiling
A __________ creates shortages because QD > QS and Non-price rationing.
Binding price Ceiling
are ceilings placed on the rents that landlords may charge their tenants.
Rent Control
The goal of ________ policy is to help the poor by making housing more affordable.
rent control
The ____________ ___________ if set
below the equilibrium price.
price floor is not binding
The ___________ if set above the equilibrium price, leading to a surplus.
price floor is binding
An alternative mechanism for rationing of the good
Non-Price Rationing
laws dictate the lowest price possible for labor that any employer may pay.
Minimum wage
creates surpluses, non-price rationing
Binding Price Floor
What factor that affects Quantity Demanded?
Price
shows how price affects quantity supplied, other things being equal.
Supply Curve
