Understanding Graphs

Question 1

Positive (direct) Relationship

Answer 1

When an INCREASE in on variable results in an INCREASE in the value of the other variable.

Question 2

Negative (inverse) Relationship

Answer 2

INCREASE in one variable results in a DECREASE in the other variable

Question 3

Dependent variables are denoted by the

Answer 3

Y axis

Question 4

Nonprice Factors influencing Demand

T, I, F, N

Answer 4

1. Taste and preferences
2. Income
3. Future Expectations of Price
4. Number of Consumers

Question 5

Normal (direct) Good is a good for which consumers have

Answer 5

A Greater demand as their income increases,

A Smaller demand as income decreases

Question 6

Inferior (inverse) Good is a good for which consumers have

Answer 6

A Smaller demand as their income Increases

A Greater demand as their income Decreases

Question 7

Substitute good

Answer 7

If an INCREASE in price of good Y causes consumers to INCREASE demand for good X and visa versa

Question 8

Complimentary Good

Answer 8

If INCREASE in price of Good Y causes consumers to DECREASE demand for good X and visa versa

Question 9

Qxd is Quantity demanded of good X

The function for determining Qxd =

Answer 9

f(Px, T, I ,Py, Pz, EXC, NC,…)

Px = Price of good X
T = Tastes and preferences
I = Income
Py, Pz = Price of competitors goods
EXC = Consumer expectation of future price
NC = Number of consumers

Question 10

Market Demand Function shows

Answer 10

the quantity demanded of the good or service by all consumers in the market at any given price

Question 11

Market Demand function is influenced by these 4

Answer 11

1. Prices of related goods
2. Tastes and preferences
3. Income
4. Future Expectations

Question 12

Non-price Factors Influencing Supply

S, I, P, F, N

Answer 12

1. State of Technology (knowledge of combining inputs to lower costs)
2. Input prices
3. Prices of goods related in Production (increased demand in white mean means increased production of dark meat)
4. Future Expectations
5. Number of producers

Question 13

Qxs is the supply function for a quantity supplied of good X and the function for determining Qxs is

Answer 13

f(Px, TX, P1, Pa, Pb, EXP, NP, …)

Px = Price of good X
Tx = State of Technology
P1 = Prices of inputs
Pa, Pb = Prices of goods A and B which are related in production of good X
EXP = producer expectations about future prices
NP = Number of producers

Question 14

Individual supply function shows

Answer 14

the variables that influence an individuals producers supply of a product

Question 15

Market supply function shows

Answer 15

The variables that influence the overall supply of a product by all producers (affected by number of producers in the market)

Question 16

Upward slopes in a supply curve show

Answer 16

positive or direct relationships between price of product and quantity of producers willing to supply

Question 17

Development of new technology causes a/an _____ in supply

Answer 17

Increase, (or rightward shift)

This is because technology lowers the cost of production

Question 18

DECREASE of price of any inputs causes a/an ____ in supply

Answer 18

Increase, (or rightward shift)

This is because it lowers the cost of production

Question 19

INCREASE of a substitute good causes a/an ____ in supply

Answer 19

Decrease (or leftward shift)

Question 20

INCREASE of a complementary good causes a/an _____ in supply

Answer 20

Increase in supply (or rightward shift)

Question 21

Producers expectations of a LOWER price results in a/an ____ in supply

Answer 21

Increase (or rightward shift)

Question 22

Producers expectations of a HIGHER price results in a/an ____ in supply

Answer 22

Decrease (or leftward shift)

Question 23

An INCREASE in the number of producers results in a/an _____ in supply

Answer 23

Increase (or rightward shift)

Question 24

Any change in the number of producers in the market is represented by

Answer 24

a shift of the entire curve

Question 25

Equilibrium price

Answer 25

Price that will actually exist in the market determine by when the quantity demanded equals the quantity supplied by producers

Question 26

Equilibrium quantity

Answer 26

Where the amount of output that consumers demand is equal to the amount that producers want to supply