Unit 3: How Markets Work

Question 1

Quantities of productive resources available to the economy are finited

Answer 1

limited resources

Question 2

Consumers will always want more. There is always something else that a consumer will want or need.

Answer 2

unlimited wants

Question 3

The problem of having limited resources and unlimited wants

Answer 3

scarcity

Question 4

A diagram that depicts the flow of money, goods, services, and resources in an economy

Answer 4

circular flow diagram

Question 5

Markets that facilitate exchanges for factors of production; they are composed of land, labor, capital, and entrepreneurship

Answer 5

factor (resource) markets

Question 6

Markets that facilitate exchanges for goods and services

Answer 6

product markets

Question 7

Curve that is created when plotted points on a demand graph are connected

Answer 7

demand curce

Question 8

Displays the price on the vertical axis and the quantity demanded on the horizontal axis

Answer 8

demand graph

Question 9

Displays information for price and quantity in a table

Answer 9

demand schedule

Question 10

The amount that quantity demanded of a good or service changes due to changes in the purchasing power of the consumer

Answer 10

income effect

Question 11

As price increases, quantity demanded falls, or as price decreases, quantity demanded increases when all other factors remain the same

Answer 11

law of demand

Question 12

When the quantity demanded of a good or service could be anything for a given price

Answer 12

perfectly elastic

Question 13

When the quantity demanded of a good or service does not change when there are changes in price. Demand is not responsive to changes in price

Answer 13

perfectly inelastic

Question 14

The percentage change in quantity demanded is greater than the percentage change in price. Demand is highly sensitive to changes in price.

Answer 14

price elastic

Question 15

Measure the responsiveness of quantity demanded to changes in price

Answer 15

price elasticity of demand

Question 16

The percentage change in quantity demanded is less than the percentage change in price. Demand is less sensitive to changes in price.

Answer 16

price inelastic

Question 17

Explains how changes in price affect which goods or services a consumer buys

Answer 17

substitution effect

Question 18

When the percentage change in quantity demanded is the same as the percentage change in price

Answer 18

unit elastic

Question 19

Latin phrase translating to “all other things being equal”

Answer 19

ceteris paribus

Question 20

A good that is consumed along with another good

Answer 20

complement good

Question 21

Factors that influence, limit, or define an economic decision or condition

Answer 21

determinants

Question 22

Any good for which demand decreases when incomes increase

Answer 22

inferior good

Question 23

Any good for which demand increases when incomes increase

Answer 23

normal good

Question 24

A good that is consumed instead of another good

Answer 24

substitute good