Economics test 2

Question 1

the supply and demand meet perfectly at a price, no surplus or shortage

Answer 1

equilibrium

Question 2

demand higher than supply

Answer 2

shortage

Question 3

quantity supplied is higher than quantity demanded

Answer 3

surplus

Question 4

system of allocating scarce goods and services according to certain criteria

Answer 4

rationing

Question 5

consists of all commerce on which applicable taxes or regulations are avoided

Answer 5

black market

Question 6

refers to quantity of a food or service

Answer 6

supply

Question 7

desire to own something with the ability to buy it

Answer 7

demand

Question 8

a government payment that supports a business or market

Answer 8

subsidy

Question 9

total cost of operating a businesses fixed cost plus variable cost is the equation

Answer 9

operating cost

Question 10

a rule- helps balance needs vs. freedom government intervention in the market

Answer 10

regulation

Question 11

rising prices make you feel poorer, having more money makes you feel richer

Answer 11

income effect

Question 12

all things equal

Answer 12

ceteris paribus

Question 13

what is the law of demand and how does it affect the quantity demanded?

Answer 13

law of demand- when a good price is lower, consumers will buy more of it
when price goes up demand goes down when price goes down demand goes up

Question 14

what is the law of supply and how does it affect the quantity supplied?

Answer 14

law of supply- price goes up then quantity supplied goes up.

price goes down then quantity supplied goes down

Question 15

how do producers adjust to changes in supply and demand? how do regulations( price floor/ price ceiling) affect these adjustments?

Answer 15

producers adjust to changes in supply and demand by if the supply goes up price is lowered, if supply goes down prices are higher
producers raise price if demand is low, and lower price when demand is high
regulations keep the prices at a reasonable price. Too much regulation a problem

Question 16

Explain the difference between a complimentary good and a substitute good? How do the prices of a good’s compliments affect its demand? How do the prices of a good’s substitute affect its demand?

Answer 16

complimentary goods-goods that go well with other goods
substitute goods- products that can be used in the place of another
There is an inverse relationship between a good’s compliments
They are directly related they are competing for each other

Question 17

What does the point where the supply and demand curves cross represent?

Answer 17

The equilibrium is the point equilibrium price

Question 18

What is the black market? Why do they come into existence? Provide at least three examples of Black markets?

Answer 18

black market- consisting of all commerce on which applicable taxes on regulations are a voided
They come into existence when price controls are implemented, to avoid regulations
-sex trafficking
-organs
-drugs

Question 19

Determinants of Supply

STONER

Answer 19

Subsidies and teases
Technology
Other goods
Number of sellers
Expectations 
Resource cost

Question 20

Determinants of Demand

BITER

Answer 20

Buyers (# of)
Income
Tastes
Expectations
Related goods

Question 21

in which direction would you expect a demand curve to shift if there was an overall increase in demand?

Answer 21

increase to the right

Question 22

in what direction would a supply curve shift if there were a decrease in supply?

Answer 22

decrease to the left

Question 23

If prices rise, but not income, what is the effect on demand?

Answer 23

the demand goes down because the income effect

Question 24

How does a producer react to a rise in demand? Why do they react this way?

Answer 24

producers raise price because there are more people willing to buy the item

Question 25

Law or shift?
Weather forecaster say that a coming holiday weekend will be sunny. Stores see increase sales for sunglasses, sunblock, and beach chairs.

Answer 25

Shift of Demand

Question 26

Law or shift?

When a coffee shop cuts the price of bagels, people want to buy more.

Answer 26

Law of Demand

Question 27

Law or shift?

More fans want to buy lower-priced tickets to a baseball games than higher priced ones.

Answer 27

Law of Demand

Question 28

Law or shift?

Sales of contact lens cleaner increase as more people wear contact lenses

Answer 28

Shift of Demand

Question 29

Law or shift?
A video game company announces it will introduce a new game console in three months. Sales of the older version of the console drop by 25%

Answer 29

Shift of Demand

Question 30

What is the result when a price floor is place above equilibrium? What about when a price ceiling is placed below the equilibrium

Answer 30

When a price floor is above equilibrium is bad, demand goes down, because it’s a surplus
Price ceiling below the equilibrium is a shortage

Question 31

How does a change in taxes affect the supply of goods and services? Explain for both a increase or decrease in taxes.

Answer 31

The increase in taxes is prices go up, supply go down

Decrease of taxes, the price goes down and supply goes up.