Microecon chapter 3

Question 1

What is demand (3)

Answer 1

• What we want
• What we can afford
• What we plan to buy

Question 2

Quantity of demand of a good

Answer 2

Amount desired to purchase at a given price

Question 3

Determinants of demands (6)

Answer 3

• Price
• Income
• Price of other goods
• Population
• Taste
• Change in weather

Question 4

Law of demand

Answer 4

All things equal, the higher the price, the lower the price, demand slope downward

Question 5

Substitution effect

Answer 5

As price rise, all things equal, the price rise relative to all other goods

Question 6

Income effect

Answer 6

If price rise, it rises relative to income, if income remains unchanged, we must buy less of the good

Question 7

Demand schedule

Answer 7

A table showing Qd. at various prices

Question 8

Demand curve

Answer 8

Graph of representation of demand schedule

Question 9

Movement along

Answer 9

Occurs only when price changes

Question 10

Shift in demands (2)

Answer 10

• If any one (or more) of the “All things equal” items changes, we see a shift in demand
• D ↑ -> Dd curve shift right
  D ↓ -> Dd curve shift left

Question 11

Demand - Income (2)

Answer 11

• For normal goods:
  I ↑ -> D ↑
  I ↓ -> D ↓
• For inferior goods:
  I ↑ -> D ↓
  I ↓ -> D ↑

Question 12

Demand - Price of related good - Substitutes

Answer 12

Psub ↑ -> D rise
Psub ↓ -> D ↓

Question 13

Demand - Price of related good - Complement

Answer 13

Pcomp ↑ -> D ↓
Pcomp ↓ -> D ↑

Question 14

Demand - Population

Answer 14

Pop ↑ -> D ↑
Pop ↓ -> D ↓

Question 15

Demand - Preference

Answer 15

D ↑/D↓ (according to your taste)

Question 16

Demand - weather changes

Answer 16

D ↑/D↓ (depends)

Question 17

Supply

Answer 17

The amount of a producer. Producer desire to sell (at given time period) at a particular price

Question 18

Law of supply

Answer 18

“All thing equal” the higher the P, the higher the Qs =>supply slope upward

Question 19

Determinants of supply (7)

Answer 19

• Price
• Price of input
• Technology
• Taxes and subsidies
• Price of other goods
• Change in the weather
• # of suppliers

Question 20

Supply schedule

Answer 20

A table showing Qs at various prices

Question 21

Supply curve

Answer 21

Graph of supply schedule

Question 22

Shifts in supply (2)

Answer 22

• Occurs when one (or more) of the “ all things equal” item changes
• S ↑ -> Supply curve shift right
  S ↓ -> Supply curve shift left

Question 23

Supply - Price of input

Answer 23

Wages ↑ -> S ↓
Wages ↓ -> S ↑

Question 24

Supply - Technology

Answer 24

Tech ↑ -> S ↑
(Tech ↓) -> S ↓

Question 25

Supply - Price of other goods

Answer 25

Pother ↑ -> S ↓
Pother ↓ -> S ↑

Question 26

Supply - weather

Answer 26

S ↑/S↓ (Depends)

Question 27

Supply - taxes and subsidies

Answer 27

Tx ↑ -> S ↓
Tx ↓ -> S ↑
Sub ↑ -> S ↑
Sub ↓ -> S ↓

Question 28

Supply - # of supliers

Answer 28

Suppliers ↑ -> S ↑
Suppliers ↓ -> S ↓

Question 29

Market equilibrium

Answer 29

Occurs when Qd = Qs = Q*

Question 30

Excess demand shortage

Answer 30

Qd > Qs (consumers offer to pay less and supplier offer to sell for less)

Question 31

Excess supply surplus

Answer 31

Qd < Qs (consumers offer to pay more and producer charge more)

Question 32

↑ (↓) D

Answer 32

D↑ => P↑, Q↑
D↓ => P↓, Q↓

Question 33

↑(↓) S

Answer 33

S↑ => P↓, Q↑
S↓ => P↑, Q↓

Question 34

↑D↑S(↓D↓S)

Answer 34

D↑, S↑ -> Q↑, P ind.
D↓, S↓ -> Q↓, P ind.

Question 35

D↓S↓(D↓S↑)

Answer 35

D↑, S↓ -> P↑, Q ind.
D↓, S↑ -> P↓, Q ind.