Exam 2 Review

Question 1

Market price system

Answer 1

a system in which resources are allocated via a market price

Question 2

Command system

Answer 2

a system in which resources are allocated by the government

Question 3

Resource allocation

Answer 3

we have to allocate/distribute resources that are produced in a given economy (who gets what)

Question 4

Market

Answer 4

any arrangement that brings buyers and sellers together to facilitate a transaction

Question 5

Quantity Demanded

Answer 5

the amount one is willing and able to buy at a specific price

Question 6

The law of demand

Answer 6

if the price increases, quantity demanded decreases & if the price decreases, quantity demanded increases

Question 7

Demand schedule

Answer 7

a table that shows both price and corresponding quantity demanded

Question 8

Demand

Answer 8

the relationship between price and quantity demanded

Question 9

Demand shifter

Answer 9

a factor that changes one quantity demanded at all prices

Question 10

Price elasticity of demand

Answer 10

a measure of the responsiveness of quantity demanded to a change in price

Question 11

Inelastic demand

Answer 11

quantity demanded is not very responsive to a change in price

Question 12

Elastic demand

Answer 12

quantity demanded is very responsive to a change in price

Question 13

Quantity supplied

Answer 13

the amount one is willing and able to sell at a specific price

Question 14

Law of supply

Answer 14

as price increases, quantity supplied increases and as price decreases, quantity supplied decreases

Question 15

List of Demand Shifters

Answer 15

-Price of related goods
-Expected future price of a good
-Income
-Expected future income
-Number of consumers
-Preferences

Question 16

List of Supply Shifters

Answer 16

-Price of related goods
-Price of inputs
-Expected future prices
-Number of sellers
-Productivity

Question 17

Substitutes

Answer 17

goods bought in place with other goods

Question 18

Complements

Answer 18

goods bought with other goods

Question 19

Expected Future Price of a good

Answer 19

when prices are expected to increase, demand increases today

Question 20

Normal good

Answer 20

a good for which demand increases when income increases

Question 21

Inferior good

Answer 21

a good for which demand increases when income decreases

Question 22

PED Formula

Answer 22

the absolute value of the percent change of quantity demanded divided by the percent change of price

Question 23

Substitute in Production

Answer 23

goods that can be replaced for another (price of a substitute in production increases, then supply decreases, and vice versa)

Question 24

Complement in production

Answer 24

goods that are jointly used (price of a complement increases, then supply increases, and the same)

Question 25

Price of inputs

Answer 25

price of inputs increases, then supply decreases

Question 26

Number of sellers

Answer 26

the number of sellers increase, supply increase

Question 27

Expected Future Prices

Answer 27

if expected future prices increase, supply today decreases

Question 28

P*

Answer 28

market equilibrium price

Question 29

Q*

Answer 29

equilibrium quantity