Krugman Textbook Chapter 3

Question 1

Competitive Market

Answer 1

A market where there are many buyers and sellers of the same good or service, and none of them can influence the price at which a good or service is sold.

Question 2

Supply

Answer 2

A good or service produced by a producer, often in exchange for another good or service.

Question 3

Demand

Answer 3

A good or service demanded by a consumer, often in exchange for another good or service.

Question 4

Demand Schedule

Answer 4

A list or table showing how much of a good or service consumers will buy at different prices.

Question 5

Quantity Demanded

Answer 5

The actual amount of a good or service consumers are willing to buy at some specific price.

Question 6

Demand Curve

Answer 6

A graphical representation of the demand schedule, showing the relationship between quantity demanded and price.

Question 7

Law of Demand

Answer 7

The principle that a higher price for a good or service, other things equal, leads people to demand a smaller quantity of that good or service.

Question 8

Shift of the Demand Curve

Answer 8

A change in the quantity demanded at any given price, represented graphically by the change of the original demand curve to a new position, denoted by a new demand curve.

Question 9

Movement along the Demand Curve

Answer 9

A change in the quantity demanded of a good that results from a change in the price of that good.

Question 10

Substitutes

Answer 10

Pairs of goods for which a rise in the price of one of goods leads to an increase in the demand for the other good.

Question 11

Complements

Answer 11

Pairs of goods for which the rise in the price of one good leads to a decrease in demand for the other good.

Question 12

Normal Good

Answer 12

A good where a rise in income increases the demand for that good - the normal case.

Question 13

Inferior Good

Answer 13

A good where a rise in income decreases the demand for that good.

Question 14

Individual Demand Curve

Answer 14

A graphical representation of the relationship between quantity demanded and price for an individual consumer.

Question 15

Quantity Supplied

Answer 15

The actual amount of a good or service producers are willing to sell at some specific price.

Question 16

Supply Schedule

Answer 16

A list or table showing how much of a good or service producers will supply at different prices.

Question 17

Supply Curve

Answer 17

A graphical representation of the supply curve, showing the relationship between quantity supplied and price.

Question 18

Shift of the Supply Curve

Answer 18

A change in the quantity supplied of a good or service at any given price, represented graphically by the change of the original supply curve to a new position, denoted by a new supply curve.

Question 19

Movement along the Supply Curve

Answer 19

A change in the quantity supplied of a good that results from a change in the price of that good.

Question 20

Input

Answer 20

A good or service used to produce another good or service.

Question 21

Individual Supply Curve

Answer 21

A graphical representation of the relationship between quantity supplied and price for an individual producer.

Question 22

Equilibrium Price

Answer 22

The price where the market is in equilibrium, or where the good or service demanded equals the quantity of that good or service.

Question 23

Equilibrium Quantity

Answer 23

The quantity of a good or service bought and sold at the equilibrium price.

Question 24

Market-Clearing Price

Answer 24

The price at which the market is in equilibrium, or when the quantity of a good or service demanded equals the quantity of that good or service supplied.

Question 25

Surplus

Answer 25

The excess of a good or service that occurs when the quantity supplied exceeds the quantity demanded. Occur when the price is above the equilibrium price.

Question 26

Shortage

Answer 26

The insufficiency of a good or service that occurs when the quantity demanded exceeds the quantity supplied. Occurs when the price is below the equilibrium price.