micro 2

Question 1

market

Answer 1

An institutional arrangement under which buyers and sellers can exchange some quantity of a good or service at a mutually agreeable price.
-Not necessarily a physical place

Question 2

perfectly competitive market is characterized by:

Answer 2

-Many buyers and sellers, none of them can affect the price
-Homogeneous or identical goods
-Mobile resources
-Perfect knowledge or information

Question 3

Market Demand Schedule

Answer 3

A table showing the quantity of a commodity that consumers are willing to purchase over a given period of time at each price of the commodity, while holding constant all other relevant economic variables on which demand depends.

Question 4

Law of Demand

Answer 4

Higher prices reduce the quantity demanded of a good or a service.

Question 5

Market Demand Curve

Answer 5

Negatively-sloped curve showing various price-quantity combinations given by the market demand schedule.

Question 6

Market Demand Shift

Answer 6

Movement of the whole curve to the left or right so that more or less of the commodity would be demanded at any price.

Question 7

Entire demand curve for a commodity would shift with a change in:

Answer 7

consumer incomes
consumer tastes
the price of related commodities
number of consumers in the marketplace

Question 8

market supply schedule

Answer 8

A table showing the quantity supplied of a commodity at each price for a given period of time.

Question 9

market supply curve

Answer 9

A positively-sloped curve showing the various price-quantity combinations given by the market supply schedule.
Sell at higher price you will want to sell more

Question 10

market supply shift

Answer 10

Movement of the whole curve to the left or right so that more or less of the commodity would be demanded at any price.

Question 11

entire supply curve for a commodity would shift with a change in:

Answer 11

–An improvement in technology
–A reduction in the price of resources used in the production of the commodity
–For agricultural commodities, more favorable weather conditions

Question 12

equilibrium price of commodity

Answer 12

The price at which the quantity demanded of the commodity equals the quantity supplied and the market clears.

Question 13

surpluse

Answer 13

Occurs when the quantity supplied exceeds the quantity demanded.(excess supply)

Question 14

shortage

Answer 14

Occurs when the quantity demanded exceeds the quantity supplied. (excess demand)

Question 15

adjustments to changes in demand

Answer 15

Suppose, there is an increase in demand which leads to higher equilibrium price. (equilibrium can change over time– ice cream example)
*First, there is a shortage after the increase, then prices bid up.
*Prices keep increasing until the market clears

Question 16

adjustments to changes in supply

Answer 16

​​*Suppose, there is an increase in supply due to new cheaper production technology which creates a surplus in the market.
*Suppliers reduce prices to get rid of the surplus.
*Prices keep decreasing until the market clears.
*The new equilibrium has a lower equilibrium price and a larger equilibrium quantity.

Question 17

supply and demand of coffee

Answer 17

*Wholesale coffee prices dropped by half between 1998 and 2004.
*This occurred because the supply of coffee increased faster than the demand.
*Vietnam, Indonesia, and Brazil contributed to the sharp increase in supply.
*Demand also increased but not enough to stop the decrease in price.

Question 18

demand and supply with trade

Answer 18

If the domestic price of a commodity is higher than the price abroad, the nation will import the commodity until the prices are equalized.

Question 19

price ceiling

Answer 19

A maximum price set below equilibrium price.
Gov trying to help the consumers
rent control

Question 20

price floor

Answer 20

A minimum price set above the equilibrium price.
Gov trying to help the producers
farmers

Question 21

excise tax

Answer 21

A tax on each unit of the commodity.
*Collection of taxes through sellers
–This causes sellers to demand a higher price for producing the same amount of the good, so the supply curve shits up.
–Consumers demand less and pay a higher price while sellers receive a smaller net price after paying the tax.
–Incidence of the tax is shared between the consumers and the producers.
–Same results holds if the tax was collected from consumers.