Chapter 4: Demand, Supply, and Markets

Question 1

Demand

Answer 1

a relation between the price of a good and the quantity that consumers are willing and able to buy per period, other things constant

Question 2

Law of Demand

Answer 2

the quantity of a good that consumers are willing and able to buy per period relates inversely

Question 3

Substitution effect of a price change

Answer 3

when the price of good falls, that good becomes cheaper compared to other goods so consumers tend to substitute that good for other goods

Question 4

relative price

Answer 4

the price of one good relative to the prices of other goods

Question 5

Money income

Answer 5

the number of dollars a person receives per period such as $400 per week

Question 6

Real income

Answer 6

income measured by the goods and services it can buy; real income changes when the price changes

Question 7

Income effect of a price change

Answer 7

a fall in the price of a good increases consumers’ real income, making consumers more able to purchase goods; for a normal good, the quantity demanded increases

Question 8

demand schedule

Answer 8

lists possible prices along with quantity demanded at each price

Question 9

Demand curve

Answer 9

a curve showing the relation between the price of a good and the quantity consumers are willing and able to buy per period, other things constant

Question 10

downward, the law of demand

Answer 10

A demand curve slopes ________, reflecting ________

Question 11

Quantity demanded

Answer 11

the amount of a good consumers are willing and able to buy per period at a particular price, as reflected by a point on a demand curve

Question 12

demand

Answer 12

the entire relationship between price and quantity demanded

Question 13

Individual demand

Answer 13

the relation between the price of a good and the quantity purchased per period by an individual consumer, other things constant

Question 14

Market demand

Answer 14

the relationship between the price of a good and the quantity purchased per period by all consumers in the market, other things constant; sum of the individual demands in the market

Question 15

Variables

Answer 15

can affect market demand are the money income of consumers, the prices of other goods, consumer expectations, the number or composition of consumers in the market, and consumer tastes

Question 16

Normal good

Answer 16

a good such as new clothes, for which demand increases, or shifts rightward, as consumer income rises

Question 17

Inferior good

Answer 17

a good, such as used clothes, for which demand decreases, or shifts leftward, as consumer income rises

Question 18

Complements

Answer 18

goods such as Pepsi and pizza, that relate in such a way that an increase in the price of one shifts the demand for the other leftward

Question 19

Tastes

Answer 19

consumer preferences; likes and dislikes in consumption; assumed to remain constant along a given demand curve

Question 20

Movement along a demand curve

Answer 20

a change in quantity demanded resulting from a change in the price of the good, other things constant

Question 21

Shift of a demand curve

Answer 21

movement of a demand curve right or left resulting from a change in one of the determinants of demand other than the price of the good

Question 22

Supply

Answer 22

a relation between the price of a good and the quantity that producers are willing and able to sell per period, other things constant

Question 23

Law of supply

Answer 23

the amount of a good that producers are willing and able to sell per period is usually directly related to its price, other things constant

Question 24

supply curve

Answer 24

a curve showing the relation between price of a good and the quantity producers are willing and able to sell per period, other things constant

Question 25

Quantity supplied

Answer 25

the amount offered for sale per period at particular price, as reflected by a point on a supply curve

Question 26

Individual supply

Answer 26

the relation between the price of a good and the quantity an individual producer is willing and able to sell per period, other things constant

Question 27

Market supply

Answer 27

the relation between the price of a good and the quantity all producers are willing and able to sell per period, other things constant

Question 28

Movement along a supply curve

Answer 28

change in a quantity supplied resulting form a change in the price of the good, other things constant

Question 29

Shift of a supply curve

Answer 29

movement of a supply curve left or right resulting from a change in one of the determinants of supply other than the price of the good

Question 30

surplus

Answer 30

excess quantity supplied

Question 31

Shortage

Answer 31

excess quantity supplied

Question 32

Equilibrium

Answer 32

Quantity demanded equals quantity supplied

Question 33

Equilibrium point

Answer 33

Intersection of the demand and supply curves