Consumer Choice Application {4}

Question 1

Define:

Market?

Answer 1

Group of buyes and sellers of a good or service

Question 2

Define:

Competitive Market?

Price takers?

Answer 2

Describing a market in which there are so many buyers and sellers that each has little effect on the market price

Price Takers: The buyers and sellers of a perfectly competitive market (b.c they accept the prices decided by the market)

Question 3

Define:

Monopoly?

Answer 3

A seller in a market who determines the price and is the only seller

Question 4

Define:

Law of Demand?

Quantity Demanded? Demand Curve? Market Demand?

Answer 4

Assuming other things remain equal…
When price rises, demand falls
When price lowers, demand rises

Quantity Demanded: Any good is the amount that buyers are willing and able to purchase
Demand Curve: The line relating price and quantity demanded (Slopes downard)
Market Demand: The sum of all the individual demands for a particular good or service

Question 5

Define:

Normal Good?

EX?

Answer 5

,If the demand for something falls, when income falls

Ice Cream

Question 6

Define:

Inferior good?

EX?

Answer 6

If the demand for something rises, when income falls

Bus rides

Question 7

Define:

Substitutes vs. Complements?

Answer 7

Substitutes: When a fall in the price of a good, reduces the demand of another
Complements: When the fall in a price of a good, raises the demand for the other

Complements: Are usually pairs of goods that are used together

Question 8

Explain:

Law of Supply?

Quantity Supplied? Supply Curve? Market Supply?

Answer 8

Assuming other things remain equal…
When the price rises, supply also rises
when the price falls, supply also** falls**

Quantity Supplied: Any good or service is the amount that sellers are willing and able to sell
Supply Curve: The price and quantity supplied
Market Supply: The sum of all the individual supply of sellers in a market