Chapter 4

Question 1

the relationship between a good’s price and the amount that people are willing to pay

Answer 1

demand

Question 2

the relationship between a good’s price and the amount that producers are willing to provide for consumers

Answer 2

supply

Question 3

two types of value

Answer 3

value in exchange
value in use

Question 4

value that is directly related to the benefits their owners receive through their use

Answer 4

value in use

Question 5

what a particular good is worth in exchange for some other good

Answer 5

value in exchange or trading value of a good

Question 6

the amount of money that a buyer pays the seller for a particular item

Answer 6

price

Question 7

prices at which goods can be sold in an open market with many potential seller and buyers

Answer 7

market prices

Question 8

states that as one’s supply of a specific good or service increases, the satisfaction derived from each additional unit tends to decrease

Answer 8

diminishing marginal utility

Question 9

the amount of satisfaction that results from a one-unit increase of a product

Answer 9

marginal utility

Question 10

the total amount of satisfaction received from possessing a particular amount of a good

Answer 10

total utility

Question 11

law that states:
“ Other things remaining equal, as the price of a good increases, the quantity demanded decreases in a free market economy”

Answer 11

law of demand

Question 12

says that when the price of a good falls, consumers tend to buy more of that good or of other items because they can do so without giving up anything

Answer 12

income effect

Question 13

indicates that people tend to substitute less expensive goods for ones whose prices have risen

explains why consumers’ expenses may not increase much when prices rise

Answer 13

substitution effect

Question 14

for everyone there is a point at which _________ becomes the decisive consideration,

Answer 14

PRICE

Question 15

a list of numbers that compares price with quantity demanded

Answer 15

demand schedule

Question 16

a graphic representation of the quantity of goods purchased at different prices

Answer 16

demand curve

Question 17

slope for demand on a graph

Answer 17

downward and to the right

Question 18

the five key factors that can shift the demand curve (change in demand)

Answer 18

1. tastes and preferences
2. income
3. population
4. prices of related goods
5. Consumer expectations

Question 19

a good whose demand is directly related to consumers’ incomes

Answer 19

normal good

Question 20

demand for these items decreases as consumers’ incomes increase or vice versa

Answer 20

inferior goods

Question 21

a good capable of being used in place of another

Answer 21

substitutes

Question 22

a good often used in conjunction with another

Answer 22

complement

Question 23

the only factor that causes a change in quantity of demand

Answer 23

price

Question 24

law that states the direct relationship between the price and the amount suppliers make available:

“Other things remaining equal, as the price of a good increases, the quantity supplies also increases in a free market economy”

Answer 24

law of supply

Question 25

a list of number that compares price with quantity supplied

Answer 25

supply schedule

Question 26

a graphic representation of the quantity of goods supplies at different prices

Answer 26

supply curve

Question 27

supply curve on a graph slopes

Answer 27

upward and to the right

Question 28

6 factors that could change supply

Answer 28

1. Technology
2. Resource Prices
3. Prices of Related Goods
4. Number of sellers
5. Producer expectations
6. Government taxes, subsidies, and regulation

Question 29

the point at which quantity demanded and quantity supplies are equal

Answer 29

equilibrium

Question 30

the situation in which the quantity demanded exceeds the quantity supplies at a given time

Answer 30

shortage

Question 31

situation in which quantity supplies is greater than the quantity demanded at a given price

Answer 31

surplus

Question 32

if prices go up, people will buy less

Answer 32

price elasticity of demand

Question 33

the major reason why the demand for most goods is elastic

Answer 33

the availability of substitutes

Question 34

if consumers will pay very high prices for a particular good because they feel there are no substitutes, we say that the demand for that good is

Answer 34

inelastic

Question 35

give a good indication of the price elasticity of demand for a good

Answer 35

demand curves

Question 36

the _____________ the slope the more inelastic the demand of that good

Answer 36

steeper

Question 37

the result of price fixing by governments is

Answer 37

overproduction or underproduction,

Question 38

price fixing by the government is a good thing

Answer 38

false
results in serious damage to economies

Question 39

when governments place a limit on how high a producer may charge for his products

Answer 39

price ceiling

Question 40

the result of a price ceiling

Answer 40

shortage in goods

Question 41

price levels set above the equilibrium prices

Answer 41

price floors

Question 42

result of price floors

Answer 42

a surplus of goods