Macro Economics Chapter 03 Power Point

Question 2

Why is this chapter 3 important?

Answer 2

•It introduces basic supply and demand analysis

Question 3

What is demand?

Answer 3

•Demand represents the choice making behavior of buyers

Question 4

What does “ceteris paribus” mean?

Answer 4

•All else remains the same

Question 5

What is the law of demand?

Answer 5

•There is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus

Question 6

What is a demand schedule?

Answer 6

•Shows the quantities of a good or service that people are willing and able to buy at different prices

Question 7

Explain a Demand schedule

Answer 7

An individual buyer’s Demand schedule for buying DVDs.point price for DVD Quantity per yearA $20 4B $15 6C $10 10D $5 16

Question 8

What is a demand curve?

Answer 8

•Depicts the relationship between price and quantity demanded

Question 9

Why do demand curves have a negative slope?

Answer 9

•At a higher price buyers will buy fewer units, and at a lower price they will buy more units

Question 10

What is market demand?

Answer 10

•The summation of the individual demand schedules in a market

Question 11

Describe an Market demand schedule

Answer 11

Market Demand Schedule for DVDs Quantity Demanded per YearPrice per DVD Fred + Mary = Total Demand$25 1 0 1$20 2 1 3$15 3 2 5$10 4 5 9

Question 12

IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY DEMANDED AND A CHANGE IN DEMAND

Answer 12

IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY DEMANDED AND A CHANGE IN DEMAND

Question 13

When price changes, what happens?

Answer 13

•The curve does not shift - there is a change in the quantity demanded

Question 14

Change in price causes???

Answer 14

Change in Quantity Demanded

Question 15

If a price decreases describe how it effects the S & D graph.

Answer 15

Downward movement along the demand curve.Increase in quantity demanded

Question 16

If a price increases describe how it effects the S & D graph.

Answer 16

Upward movement along the demand curveDecrease in quantity demanded

Question 17

When something changes other than price, what happens?

Answer 17

•The whole curve shifts,there is a change in demand

Question 18

Change in nonprice determinant causes a change in demand or change in quantity demanded?

Answer 18

Change in demand

Question 19

If a there is a change in a non price determinant describe how it effects the S & D graph.

Answer 19

Leftward or rightward shift in the demand curveDecrease or increase in demand

Question 20

What can cause a demand curve to shift? A change in:

Answer 20

Number of buyers in the market•Tastes and preferences•Income•Expectations•Prices of related goods

Question 21

What is the conclusion with price and demand?

Answer 21

•Changes in nonprice determinants can produce only a shift in a demand curve and not a movement along the demand curve

Question 22

What is a normal good?

Answer 22

•Any good for which there is a direct relationship between changes in income and its demand curve

Question 23

What is an inferior good?

Answer 23

•Any good for which there is an inverse relationship between changes in income and its demand curve

Question 24

What are substitute goods?

Answer 24

•Goods that compete with one another for consumer purchases

Question 25

What happens when the price increases for a good that has a substitute?

Answer 25

•The demand curve for the substitute good increases

Question 26

What happens when the price decreases for a good that has a substitute?

Answer 26

•The demand curve for the substitute good decreases

Question 27

What does a direct relationship between price and quantity mean?

Answer 27

•The two move in the same direction

Question 28

What are complementary goods?

Answer 28

•Goods that are jointly consumed with another good

Question 29

What happens when the price increases for a good that has a complement?

Answer 29

•The demand curve for the substitute good decreases

Question 30

What happens when the price decreases for a good that has a complement?

Answer 30

•The demand curve for the substitute good increases

Question 31

What does an inverse relationship between price & quantity mean?

Answer 31

•It means that the two move in opposite directions

Question 32

What is supply?

Answer 32

•Supply represents the choice making behavior of sellers

Question 33

What is the law of supply?

Answer 33

•There is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus

Question 34

Why do supply curves have a positive slope?

Answer 34

•Only at a higher price will it be profitable for sellers to incur the higher opportunity cost associated with supplying a larger quantity

Question 35

What is market supply?

Answer 35

•The horizontal summation of all the quantities supplied at various prices that might prevail in the market

Question 36

IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY SUPPLIED AND A CHANGE IN SUPPLY

Answer 36

IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY SUPPLIED AND A CHANGE IN SUPPLY

Question 37

When price changes, what happens?

Answer 37

•The curve does not shift - there is a change in the quantity supplied

Question 38

Change inPrice effects?

Answer 38

Change in Quantity Supplied

Question 39

When something changes other than price, what happens?

Answer 39

•The whole curve shifts - there is a change in supply

Question 40

Change in nonprice determinant causes???

Answer 40

Change in supply

Question 41

What can cause a supply curve to shift? A change in:

Answer 41

•Number of sellers in the market•Technology•Resource prices•Taxes and subsidies•Expectations of producers•Prices of other goods the firm could produce

Question 42

What is the conclusion?

Answer 42

•Changes in nonprice determinants can produce only a shift in a supply curve and not a movement along the supply curve

Question 43

What is a market?

Answer 43

•Any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged

Question 44

What is the equilibrium price?

Answer 44

•The price towards which the economy tends

Question 45

Where is the equilibrium price?

Answer 45

•At the price where the quantity demanded and the quantity supplied are equal