chapter 4, laws of supply and demand

Question 1

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

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

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

Answer 3

value in use

Question 4

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

Answer 4

value in exchange

Question 5

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

Answer 5

price

Question 6

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

Answer 6

market price

Question 7

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

Answer 7

diminishing marginal utility

Question 8

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

Answer 8

marginal utility

Question 9

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

Answer 9

total utility

Question 10

explains the inverse relationship between the price of a good and the amount that people choose to buy

Answer 10

law of demand

Question 11

in order to know if demand for an item is high or law, we must:

Answer 11

be able to show the amount bought over al length of time

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

Answer 13

substitution effect

Question 14

a list of numbers that compares price with quantity demanded

Answer 14

demand schedule

Question 15

representation of the quantity of goods purchased at different prices

Answer 15

demand curve

Question 16

“other things being equal”

Answer 16

ceteris paribus

Question 17

five factor that can increase or decrease the demand for a good:

Answer 17

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

Question 18

a good whose demand is directly related to consumers’ incomes is called a:

Answer 18

normal good

Question 19

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

Answer 19

inferior good

Question 20

a good capable of being used in place of another

Answer 20

substitutes

Question 21

a good often used in conjunction with another

Answer 21

complements

Question 22

states the direct relationship between the price of a good and the amount that suppliers will make available

Answer 22

law of supply

Question 23

a list of numbers that compares price with quantity supplied

Answer 23

supply schedule

Question 24

a representation of the quantity of goods supplied at different prices

Answer 24

supply curve

Question 25

six factors that can increase or decrease the supply of a good:

Answer 25

1. technology
2. resource prices
3. prices of related goods
4. number of sellers
5. producer expectations
6. government taxes, etc.

Question 26

what are subsidies

Answer 26

money given to businesses by governments encourage production

Question 27

the point at which quantity demanded and quantity supplied are equal

Answer 27

equilibrium

Question 28

two effects used to explain why price changes influence the quantity demanded for a good

Answer 28

income effect and substitution effect

Question 29

the situation in which the quantity demanded exceeds the quantity supplied at a given price

Answer 29

shortage

Question 30

the quantity supplied of a good is greater than the quantity demanded at a given price

Answer 30

surplus

Question 31

explain the price elasticity of demand phenomenon

Answer 31

if prices go up, people will buy less

Question 32

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

Answer 32

price ceiling

Question 33

price levels set above the equilibrium prices

Answer 33

price floor