Module 5

Question 1

What is a competitive market? and how it is described by the supply and demand model?

Answer 1

a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold

The supply and demand model shows the behavior of the competitive market

Question 2

What is a demand curve?

Answer 2

a graphical representation of demand schedule. It snows the relationship between quantity demanded and price

Question 3

Demand Schedule

Answer 3

shows how much of a good or service

Question 4

Market

Answer 4

group of producers and consumers who exchange a good or service for payment

Question 5

Supply and Demand Model

Answer 5

model of how the competitive market works

Question 6

Quantity Demanded

Answer 6

the actual amount of a good or service consumers are willing and able to buy at some specific

Question 7

Demand Curve

Answer 7

a graphical representation of demand schedule. It snows the relationship between quantity demanded and price

Question 8

Law of Demand

Answer 8

says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service

Question 9

Change in Demand

Answer 9

is a shift of the demand curve, which changes the quantity demanded at any given price

Question 10

Movement along the Demand Curve

Answer 10

a change in the quantity demanded of a good that is the result of a change in that good’s price

Question 11

Substitutes

Answer 11

two goods are substitutes if a rise in a price of one of the goods leads to an increase in the demand for the other good

Question 12

Complements

Answer 12

two goods complements if a rise in the price of one of the goods leads to a decrease in the demand for the other good

Question 13

Normal Good

Answer 13

when a rise in income increases the demand for a good-the normal case- it is a normal good

Question 14

Inferior Good

Answer 14

When a rise in income decreases the demand for a good, it is an inferior good

Question 15

Individual Demand Curve

Answer 15

illustrates the relationship between quantity demanded and price for an individual consumer

Question 16

Price Causation Factors

Answer 16

Income Effects
Lower P (prices), purchasing power increase
Higher P, purchasing power decreases

Substitution Effect

Law of Diminishing Marginal Utility

Question 17

Demand

Answer 17

Inverse relationship b/w P and Q (quantity demand)

Question 18

When will there be movement ALONG the curve?

Answer 18

If there is a change of P of the same good, that the change of Q will move it along the curve, not shift it.

Question 19

Determinants of Demand: these cause a shift of the curve (5) TPEIP

Answer 19

△taste
△population
△expectation
△income
△P of related goods (subs and comps)