Chapters 4 & 5

Question 1

The 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 of goods 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

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

Answer 6

market price

Question 7

as one’s use 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 from a one-unit increase of a product, tends to become smaller with each additional unit

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

other things remaining equal, as the price of a good increases, the quantity demanded decreases in a free market economy

Answer 10

law of demand

Question 11

how to know if the demand for an item is high or low

Answer 11

know the amount bought over a length of time

Question 12

when the price of a good falls, consumers tend to buy more of that good or of some 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

for everyone, there is a point at which _____ becomes the decisive consideration, the point at which a consumer alters his economic behavior

Answer 14

price

Question 15

a list of numbers that compares price with quantity demanded

Answer 15

demand schedule

Question 16

a graphic representation of the quantity of goods purchased at different prices

Answer 16

demand curve

Question 17

the demand curve always slopes ____ and ____________

Answer 17

down and to the right

Question 18

the five factors that can shift the demand curve

Answer 18

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

Question 19

a good whose demand is directly related to consumers’ incomes

Answer 19

normal good

Question 20

demand for this kind of item decreases as consumers’ incomes increase, and vice versa

Answer 20

inferior good

Question 21

a good capable of being used in place of another

Answer 21

substitute

Question 22

a good often used in conjunction with another

Answer 22

complement

Question 23

is represented by any specific point on a demand curve

Answer 23

quantity demanded

Question 24

other things remaining equal, as the price of a good increases, the quantity supplied also increases in a free market economy

Answer 24

law of supply

Question 25

a list of numbers that compares price with quantity supplied

Answer 25

supply schedule

Question 26

a graphic representation of the quantity of goods supplied at different prices

Answer 26

supply curve

Question 27

any specific point on a supply curve

Answer 27

quantity supplied

Question 28

the supply curve slopes ____ and _____________

Answer 28

up and to the right

Question 29

the six factors that can shift the supply curve

Answer 29

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

Question 30

monetary assistance given by government to a business to encourage production

Answer 30

subsidy

Question 31

the point at which quantity demanded and quantity supplied are equal

Answer 31

equilibrium

Question 32

the situation in which the quantity demanded exceeds the quantity supplied

Answer 32

shortage

Question 33

the quantity supplied of a good is greater than the quantity demanded

Answer 33

surplus

Question 34

if prices go up, people will buy less

Answer 34

price elasticity of demand

Question 35

the major reason why the demand for most goods is elastic

Answer 35

availability of substitutes

Question 36

consumers will pay very high prices for a particular commodity because they feel there are no substitutes

Answer 36

inelastic

Question 37

the result of price fixing by governments

Answer 37

overproduction and underproduction

Question 38

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

Answer 38

price ceiling

Question 39

price levels are set above the equilibrium prices

Answer 39

price floors

Question 40

a place where goods are bought and sold

Answer 40

market

Question 41

signs that are used by consumers and producers to determine how much of a good to buy or sell at a given price and time

Answer 41

market signal

Question 42

goods that have a life expectancy of less than three years

Answer 42

nondurable goods

Question 43

goods which are expected to last at least three years

Answer 43

durable goods

Question 44

who determines what goods are to be produced and in what quantity in a free market economy

Answer 44

consumers

Question 45

alternative, illegal systems for exchanging goods to avoid governmental regulations

Answer 45

black markets

Question 46

the part of an economy that is controlled by private individuals, businesses, and organizations

Answer 46

private sector

Question 47

is controlled by national, state, and local governments

Answer 47

public sector

Question 48

desire to work to improve one's economic situation

Answer 48

profit motive

Question 49

the diminishing of the value of goods that is caused by wear and time

Answer 49

depreciation

Question 50

the excess of the total revenue paid by buyers for goods over the seller's total expense of producing those goods

Answer 50

profit

Question 51

the value of the best alternative that is foregone when a different alternative is taken

Answer 51

opportunity cost

Question 52

the total value of a business minus any liabilities

Answer 52

equity