Chapter 4 Flashcards
What does demand refer to?
The quantities of a good or service that the potential buyers are willing and able to buy.
What is the law of demand?
As the price of a product decreases, the quantity demanded increases.
What is the first determinant of demand?
The price of the product.
How does the price of related products affect demand?
Households’ decisions about how many tomatoes to purchase depend on the prices of related products.
Define complements in terms of demand.
Goods that are used jointly.
Define substitutes in terms of demand.
Goods that can be used instead of the goods in question.
What is the second determinant of demand?
The income of consumers.
What does consumer income determine?
Purchasing power.
What is the third determinant of demand?
The taste (or preference) of the consumer.
How does consumer taste impact demand?
Can have a positive or a negative impact on the quantity demanded.
What is the fourth determinant of demand?
The number of households.
What is the law of supply?
The quantities of a good or service that producers plan to sell at each possible price.
What is the first determinant of supply?
The price of tomatoes.
How does the price of alternative products affect supply?
Farmers’ decisions depend on the prices of alternative products.
What is the third determinant of supply?
Prices of production and other inputs.
How do expected future prices influence supply?
Higher expected future prices lead to increased planned production.
What is the fifth determinant of supply?
The state of technology.
What is the distinction between a movement along the demand curve and a shift of the demand curve?
Movement along the curve is due to price changes; shift is due to other factors.
What is consumer surplus?
The difference between what consumers pay and the value they receive.
What does producer surplus involve?
Producers being willing to supply units of the product at less than market price.
What is the relationship between consumer surplus and market equilibrium?
Consumer surplus is maximized at market equilibrium.
Fill in the blank: The quantity of tomatoes that farmers plan to sell at different prices depends on the _______.
costs of production.
True or False: An increase in consumer taste for tomatoes will decrease the demand for tomatoes.
False.
