Chapter 4 Flashcards
What determines the price and the quantity produced of most goods?
The interaction of supply and demand
When a consumer is able and willing to buy a good or service, they create what?
Demand
Goods for which the demand falls when income rises.
Inferior goods
How is the future price related to the current demand?
If the price is expected to rise, current demand will rise.
What determines how a change in prices will affect total revenue for a company?
Elasticity of demand
What kind of system is the U.S. economy based on?
Market
Ceteris paribus, or “all other things held constant,” is an assumption that has what effect on a demand schedule?
It takes only prices into account.
Shows the quantities of product demanded at each price by all consumers in a market.
Market demand schedule
Table that lists the quantity of a good that a person will buy at different prices.
Demand schedule
What is a basic principle of the law of demand?
When a good’s price is lower, people will buy more of it.
How is the current demand for a good related to its future price?
If the price is expected to drop, current demand will fall.
What is a good that might not be bought when prices rise?
Luxury
What kind of changes would be expected in the demand of a country that has a growing population?
A rise in the demand for shelter.
What is a company’s total revenue?
The amount a company receives for selling its goods.
When prices rise, what happens to income?
It buys less.
What goods would be likely to be bought in the same quantity even if it doubled in price?
Pencils
Demand for movie rentals is highly elastic. What will happen to a video store that raises the price of a rental?
Possibly gain or lose revenue.
