macroeconomics chapter 2

Question 1

equilibrium price

Answer 1

the price at which quantity demanded equals quantity supplied

Question 2

supply

Answer 2

the quantity of a good or service that firms are willing and able to sell at a given price in a given time period

Question 3

demand

Answer 3

the quantity consumers are willing to buy

Question 4

effective demand

Answer 4

the desire for a good or service and ability to pay for it

Question 5

market demand

Answer 5

the quantity of good or service that all consumers in the market are willing to buy at any price

Question 6

competitive market

Answer 6

a market with a large number of buyers and sellers and good market information and firms can easily enter/ leave

Question 7

what causes a movement along demand curve

Answer 7

change in price

Question 8

demand curve shift right

Answer 8

increase in demand

Question 9

demand curve shift left

Answer 9

decrease in demand

Question 10

causes of a shift in demand curve

Answer 10

social trends 
change in price of substitute goods
change in price of complementary goods
change in income
size of population

Question 11

normal good

Answer 11

demand increases as income increases

Question 12

inferior good

Answer 12

demand decreases as income increases

Question 13

Price elasticity of demand (PED)

Answer 13

A measure of the responsiveness of the quantity of a good demanded to changes in its price

Question 14

factors effecting price elasticity of demand

Answer 14

substitutability
percentage of income
necessity or luxury
time
cost of changing to a new good
brand loyalty

Question 15

income elasticity of demand

Answer 15

a measure of the responsiveness of quantity demanded of a good to changes in income

Question 16

cross-price elasticity of demand

Answer 16

a measure of the responsiveness of quantity demanded due to changes of price of another good

Question 17

market supply

Answer 17

the quantity that all firms plan to sell at a given price in a given time period

Question 18

shifts in supply curve

Answer 18

costs of production
technical progress
taxes 
subsidies
entry of new producers

Question 19

price elasticity of supply

Answer 19

a measure of how much quantity supplied responds to a change in price of that good.

Question 20

factors determining elasticity of supply

Answer 20

length of production period
spare capacity
ease of accumulating stocks
number of firms in market more firms more elastic
time 
ease of switching production methods

Question 21

disequilibrium

Answer 21

when quantity demanded does not equal quantity supplied leading to excess supply or demand

Question 22

joint supply

Answer 22

when more than one product can be made from the same raw material

Question 23

competing supply

Answer 23

when raw materials are used to produce one good and cant make another good

Question 24

complimentary good

Answer 24

a good that is consumed with another good

Question 25

substitute good

Answer 25

goods that can be used to replace the purchase of similar goods when prices rise

Question 26

composite demand

Answer 26

demand for a good that has more than one use

Question 27

derived demand

Answer 27

demand for a good which is an input into the production of another