QUIZ 1-Ch. 4 (2/9)

Question 1

market

Answer 1

a group of buyers and sellers of a particular good or service

buyers determine demand for the product

sellers determine supply of the product

Question 2

competitive market

Answer 2

describes a market where there are so many buyers and so many sellers that each has a negligible impact on the market price

*think: each ice cream seller has limited control over the price b/c other sellers offering similar products

Question 3

perfectly competitive market

Answer 3

2 characteristics a perfectly competitive market must have:
-the goods offered for sale are all exactly the same
-the buyers & sellers are so numerous that no single buyer or seller has any influence over the market price

Question 4

price takers

Answer 4

must accept the price that the market determines

Question 5

monopoly

Answer 5

market that only has one seller that sets the price

Question 6

quantity demanded

Answer 6

the amount of the good that buyers are willing and able to purchase

Question 7

Law of Demand

Answer 7

other things being equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises

Question 8

Demand schedule

Answer 8

a table that shows the relationship between the price of a good and the quantity demanded (holding everything else constant)

Question 9

Market Demand

Answer 9

the sum of all the individual demands for a particular good or service

Question 10

5 variables that can shift the demand curve:

Answer 10

income, prices of related goods, tastes, expectations, number of buyers

Question 11

normal good

Answer 11

when the demand for a good falls, income falls

*normal goods are the norm

Question 12

inferior good

Answer 12

when the demand for a good rises, income falls

*think: ramen noodles

Question 13

substitutes

Answer 13

when a fall in the price of one good reduces the demand for another good, the two goods are called subsitutes

*think: hot dogs and hamburgers

Question 14

complements

Answer 14

when a fall in the price of one good raises the demand for another good, the two goods are called complements

*think: peanut butter & jelly!

Question 15

5 shifters of supply:

Answer 15

technology, prices of inputs (relevant resources), # of producers, producer expectations (about the future) & weather

Question 16

“ceteris paribus”

Answer 16

all other things being held constant

Question 17

change in quantity demanded:

Answer 17

a change in price results in a change in quantity demanded ONLY

Question 18

Law of Supply

Answer 18

when price increases, more products are produced and when price decreases, less products are produced

Question 19

change in quantity supplied:

Answer 19

a change in price changes quantity supplied ONLY

Question 20

the market conflict:

Answer 20

producers want to sell product at highest price & buyers want to buy at the lowest price

so, leads to negogiation

Question 21

shortage

Answer 21

exists when the quantity demanded of a good exceeds the quantity supplied at a given price

not enough of the good to satisfy demand

Question 22

surplus

Answer 22

exists when the quantity supplied of a good exceeds the quantity demanded at a given price

too much of the good available

Question 23

equilibrium

Answer 23

occurs when price of good=quantity sellers are willing/able to supply

Question 24

consumer surplus

Answer 24

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays

Question 25

producer surplus

Answer 25

the amount a seller is paid for a good minus the seller’s cost of providing it