Chapter 4 - The Market Forces of Supply and Demand

Question 1

Market

Answer 1

A group of buyers and sellers of a particular good or service.

Question 2

Competitive Market

Answer 2

A market in which there are many buyers and sellers so that each has a negligible impact on the market price.

Question 3

Perfectly Competitive

Answer 3

Goods are that are offered are exactly the same, and no buyer or seller has a big influence over the price.

Question 4

Monopoly

Answer 4

When a good or service only has one seller and they determine the price.

Question 5

Quantity Demanded

Answer 5

The amount of a good that buyers are willing and able to purchase.

Question 6

Law of Demand

Answer 6

The claim that, other things equal, the quantity demanded of a good falls when the price of the good rises.

Question 7

Demand Schedule

Answer 7

A table that shows the relationship between the price of a good and the quantity demanded.

Question 8

Demand Curve

Answer 8

A graph of the relationship between the price of a good and the quantity demanded.

Question 9

Market Demand

Answer 9

Sum of all the individual demands for a particular good or service.

Question 10

Which way does the demand/supply curve shift if there is an increase in demand?

Answer 10

Right

Question 11

Which way does the demand/supply curve shift if there is a decrease in demand?

Answer 11

Left

Question 12

Normal Good

Answer 12

A good for which, other things equal, an increase in income leads to an increase in demand.

Question 13

Inferior Good

Answer 13

A good for which, other things equal, an increase in income leads to a decrease in demand.

Question 14

Substitute

Answer 14

Two goods for which an increase in price in one leads to an increase in demand for the other. Consumed in place of each other.

Question 15

Complement

Answer 15

Two goods for which an increase in the price of one leads to a decrease in the demand for the other. Consumer together.

Question 16

Things that lead to a shift in the demand curve

Answer 16

Income
Prices of Related Goods
Tastes
Expectations
Number of Buyers

Question 17

Quantity Supplied

Answer 17

The amount of a good that sellers are willing and able to sell.

Question 18

Law of Supply

Answer 18

The claim that, other things equal, the quantity supplied of a good rises when the price of the good rises.

Question 19

Supply Schedule

Answer 19

A table that shows the relationship between the price of a good and the quantity supplied.

Question 20

Supply Curve

Answer 20

A graph of the relationship between the price of a good and the quantity supplied.

Question 21

Market Supply

Answer 21

The sum of the supplies of all sellers.

Question 22

Factors that influence a shift in the supply curve

Answer 22

Input Prices
Technology
Expectations
Number of Sellers

Question 23

Equilibrium

Answer 23

A situation in which the price has reached the level where quantity demanded equals quantity supplied. The point where the supply and demand curves intersect on a graph.

Question 24

Equilibrium Price

Answer 24

The price that balances quantity supplied and quantity demanded. The price at the equilibrium. Sometimes called the market clearing price.

Question 25

Equilibrium Quantity

Answer 25

The quantity supplied and the quantity demanded at the equilibrium price. The quantity at the equilibrium.

Question 26

Surplus

Answer 26

A situation in which quantity supplied is greater than quantity demanded. Sometimes called excess supply.

Question 27

Shortage

Answer 27

A situation in which quantity demanded is greater than quantity supplied. Sometimes called excess demand.

Question 28

Law of Supply and Demand

Answer 28

The claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance.

Question 29

Three Steps to Analyzing Equilibrium

Answer 29

1. Decide whether the event shifts the supply or demand curve (or both)
2. Decide which direction the curve shifts
3. Use supply and demand diagram to see how the shift changes the equilibrium price and quantity