Chapter 4

Question 1

Perfectly Competitive Market

Answer 1

a market with many sellers and buyers of a homogenous product and no barriers to entry

Question 2

Quantity demand

Answer 2

the amount of a product that consumers are willing and able to buy

Question 3

Demand schedule

Answer 3

A table that shows the relationship between the price of a product and the quantity demanded, ceteris paribus

Question 4

Individual Demand Curve

Answer 4

a curve that shows the relationship between the price of a good and quantity demanded by an individual consumer, ceteris paribus

Question 5

Law of demand

Answer 5

There is a negative relationship between price and quantity demanded, ceteris paribus

Question 6

Change in quantity demanded

Answer 6

A change in the quantity consumers are willing and able to buy when the price changes; represented graphically by movement along the demand curve

Question 7

Market demand curve

Answer 7

a curve showing the relationship between price and quantity demanded by all consumers, ceteris paribus

Question 8

Quantity supplied

Answer 8

the amount of a product that firms are willing and able to sell

Question 9

Supply schedule

Answer 9

a table that shows the relationship between teh price of a product and quantity supplied, ceteris paribus

Question 10

Individual supply curve

Answer 10

A curve showing the relationship between price and quantity supplied by a single firm, ceteris paribus

Question 11

Law of supply

Answer 11

There is a positive relationship between price and quantity supplied, ceteris paribus

Question 12

Change in quantity supplied

Answer 12

A change in the quantity firms are willing and able to sell when the price changes; represented graphically by the movement along the supply curve

Question 13

Minimum supply price

Answer 13

the lowest price at which a product will be supplied

Question 14

Market supply curve

Answer 14

a curve showing the relationship between the market price and quantity supplied by all firms, ceteris paribus

Question 15

Market Equilibrium

Answer 15

a situation in which the quantity demanded equals the quantity supplied at the prevailing market price

Question 16

Excess Demand

Answer 16

A situation in which, at the prevailing price, the quantity demanded exceeds the quantity supplied

Question 17

Excess supply

Answer 17

A situation in which the quantity supplied exceeds the quantity demanded at the prevailing price

Question 18

Change in Demand

Answer 18

a shift of the demand curve caused by a change in a variable other than the price of the product

Question 19

Normal Good

Answer 19

a good for which an increase in income increases demand

Question 20

Inferior Good

Answer 20

a good for which an increase in income decreases demand

Question 21

Substitutes

Answer 21

Two goods for which an increase in the price of one good increases the demand for the other good

Question 22

Complements

Answer 22

Two goods for which a decrease in the price of one good increases the demand for the other good

Question 23

Change in supply

Answer 23

a shift of the supply curve caused by a change in a variable other than the price of the product

Question 24

What are variables that affect an individual consumer’s decision and help predict quantity demanded?

Answer 24

A. Price of product
B. Consumer's income
C. Price of substitute good
D. Price of complementary goods
E. Consumer's preferences, advertising
F. Consumer's expectations about future prices

Question 25

What are variables affecting how much produce to sell?

Answer 25

A. Price of product B. Wage paid to workers C. Price of materials D. Cost of capital E. State of production technology F. Producers' expectations about future prices G. Taxes paid to the government or subsidies

Question 26

What are variables that affect demand for a product and the market equilibrium?

Answer 26

``` A. Income B. Prices of related goods C. Tastes D. Advertising E. Number of Consumers ```

Question 27

What are ways to increase demand curve?

Answer 27

1. Increase income with normal good 2. Decrease income with inferior good 3. Increase price of a substitute good 4. Decrease price of a complementary good 5. Increase population 6. Increase consumer preferences for good 7. Increase expected future price

Question 28

What are ways to decrease demand curve?

Answer 28

1. Decrease income with normal good 2. Increase income with inferior good 3. Decrease price of substitute good 4. Increase price of a complementary good 5. Decrease population 6. Decrease consumer preferences for good 7. Decrease expected future price

Question 29

What are other variables that affect supply and market equilibrium?

Answer 29

A. Wages B. Material Prices C. Technology

Question 30

What are ways to increase supply curve?

Answer 30

1. Decrease wage 2. Decrease price of materials or capital 3. Increase technological advance 4. Increase government subsidy 5. Decrease expected future price 6. Increase number of producers

Question 31

What are ways to decrease the supply curve?

Answer 31

1. Increase wage 2. Increase price of materials or capital 3. Increase tax 4. Increase expected future price 5. Decrease number of producers

Question 32

An increase in demand...

Answer 32

Increases equilibrium price | Increases equilibrium quantity

Question 33

A decrease in demand...

Answer 33

Decreases equilibrium price | Decreases equilibrium quantity

Question 34

An increase in supply...

Answer 34

Decreases equilibrium price | Increases equilibrium quantity

Question 35

A decrease in supply...

Answer 35

Increases equilibrium price | Decreases equilibrium quantity

Question 36

If equilibrium price and quantity move in same direction...

Answer 36

the changes were caused by a change in demand

Question 37

If the equilibrium price and quantity move in opposite directions...

Answer 37

the changes were caused by a change in supply