Unit 2

Question 0

Law of Demand

Answer 0

consumers buy more of a product when price decreases and less when price increases

Question 1

Substitution effect on demand

Answer 1

Consumers react to price increases by consuming less of a product and more of a substitute product

Question 2

Shift in demand- income

Answer 2

The changes in consumption of normal and inferior goods caused by changes in income

Question 3

Shift in demand-consumer tastes and preferences

Answer 3

play a role in fads

Question 4

Shift in demand-number of buyers

Answer 4

More or less

Question 5

Shift in demand-consumer expectations

Answer 5

The current demand for a good is positively related to it’s expected future price

Question 6

Shift in demand-related goods

Answer 6

Demand curve for one good can be affected by another (substitute and complementary)

Question 7

Shift in demand-population

Answer 7

Rise in population will in increase demand for houses, food, etc.

Question 8

Elastic and inelastic

Answer 8

Elastic- demand changes with price

Inelastic-demand stays the same

Question 9

Factors that effect elasticity of demand-availability of substitutes

Answer 9

Few substitutes-inelastic

Many substitutes-elastic

Question 10

Factors that effect elasticity of demand-change over time

Answer 10

Beginning-inelastic

End-elastic

Question 11

Factors that effect elasticity of demand-relative importance

Answer 11

Clothing-elastic

Shoelaces-inelastic

Question 12

Factors that effect elasticity of demand-necessities VS luxuries

Answer 12

Necessities-inelastic

Luxuries-elastic

Question 13

Demand schedules and curves

Answer 13

Relationship between money and quantity demanded

Question 15

Law of diminishing marginal utility

Answer 15

Demand decreases as utility decreases

even at reduced prices EX: all you can eat buffet

Question 16

Law of supply

Answer 16

Suppliers will offer more of a good or service at a higher price and less of a good or service at a lower price

Question 17

Non-price factors shift in SUPPLY-Resources

Answer 17

(as $ changes)

Question 18

Non-price factors shift in SUPPLY-Technology

Answer 18

——> positive

Question 19

Non-price factors shift in SUPPLY-Government influences (taxes and subsides)

Answer 19

Increased tax:
Subsides(government payment that supports market):
——>

Question 20

Non-price factors shift in SUPPLY-Competition form global trading partners

Answer 20

——> increase

Question 21

Non-price factors shift in SUPPLY-Expectations of price changes

Question 22

Non-price factors shift in SUPPLY-Natural disasters

Answer 22

<——- decrease

Question 23

Non-price factors shift in SUPPLY-productivity or lack of it

Answer 23

(human element)

Question 24

Shortages

Answer 24

When quantity demanded is greater than quantity supplied EX: fads cause a shortage because of excess demand

Question 25

Surplus

Answer 25

When quantity supplied is greater than demanded EX: reduced cost of production causes business to produce more; expect when consumers demand stays the same there is a surplus

Question 26

Price equilibrium

Answer 26

When demand and supply are equal at one price

Question 27

Price Floor

Answer 27

Minimum price set by government that must be paid for a product EX: minimum wage-when wage is higher more people want to work causing a SURPLUS

Question 28

Price Ceiling

Answer 28

Maximum price that can be legally charged for a good EX: Rent control to prevent inflation during a housing crisis-causing a SHORTAGE of housing