Test 1

Question 1

Markets

Answer 1

A group of buyers and sellers of a particular good or service where buyers determine demand and sellers will determine supply

Question 2

Quantity Demanded

Answer 2

The amount of the good that consumers are willing and able to pay at the price

Question 3

Law Of Demand

Answer 3

As the price of a good rises, and everything else remains the same, the quantity demanded of that good falls

Question 4

Buyers Reservation Price

Answer 4

Largest dollar amount the consumer is willing and able to pay for the good

Question 5

Supply

Answer 5

Relationship between price and quantity supplied

Question 6

Sellers Reservation Price

Answer 6

Smallest dollar amount for which a producer is willing to sell an additional unit

Question 7

Consumers surplus

Answer 7

Difference between a buyers reservation price and the price actually paid

Question 8

Producer surplus

Answer 8

The difference between a sellers reservation price and the price collected

Question 9

Price Ceiling

Answer 9

A maximum allowable price specified by law

Question 10

Price floor

Answer 10

A minimum allowable price specified by law

Question 11

Determinants of Demand

Answer 11

Income, Prices of related goods (Substitutes and complements), Tastes/preferences, population, expected prices.

Question 12

Determinants of supply

Answer 12

Input Prices, Tech., Weather, Pop., Expectation of future prices

Question 13

Elasticity

Answer 13

A measure of responsiveness of one variable to changes in another

Question 14

Elasticity of Demand

Answer 14

a measure of how responsive Qd is to a change in price of that good.

Question 15

Classifications of elasticity

Answer 15

Ed>1 it is elastic….Ed<1 its inelastic….Ed=1unit elastic (Proportional changes in p and q)….Ed=infinity is perfectly elastic…Ed=0 is perfectly inelastic

Question 16

Determinants of inelastic

Answer 16

Fewer substitutes, necessities, small share of income (coffee, toothpicks)

Question 17

Determinants of elastic

Answer 17

Lots of substitutes, luxuries

Question 18

Determinants of supply

Answer 18

Flexibility of inputs (flexible makes more elastic, and inflexible makes more inelastic), Mobility of inputs (Mobile inputs is elastic and opposite), time (short run is inelastic and long run is elastic)