vocab 4-6

Question 1

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

Answer 1

Market

Question 2

there are many buyers and many sellers, and each has a negligible impact on market prices.

Answer 2

competitive market

Question 3

is a seller who must accept the market price for the products they provide.

Answer 3

Price taker

Question 4

is a seller who is able to set the price of the goods being sold

Answer 4

price maker

Question 5

Goods for which, ceteris paribus, an increase in income leads to an increase in demand (and a decrease in income leads to a decrease in demand).

Answer 5

normal goods

Question 6

Goods for which, ceteris paribus, an increase in income leads to a decrease in demand (and a decrease in income leads to an increase in demand)

Answer 6

Inferior goods

Question 7

Goods for which, ceteris paribus, an increase in the price of one good leads to a decrease in demand for the other good (and a decrease in the price one good leads to an increase in demand for the other good)

Answer 7

complements

Question 8

Goods for which, ceteris paribus, an increase in the price of one good leads to an increase in demand for the other good (and a decrease in the price of one good leads to a decrease in demand for the other good)

Answer 8

substitutes

Question 9

The amount of a good that buyers are willing and able to purchase.

Answer 9

The quantity demanded

Question 10

States the relationship between price and quantity demanded. It says that, ceteris paribus, the quantity demanded of a good falls when the price of a good rises (and the quantity demanded of a good rises when the price of a good falls)

Answer 10

Law of demand

Question 11

A table showing the relationship between the price of a good and the quantity demanded of that good

Answer 11

Demand schedule

Question 12

A graphical representation of the relationship between the price of a good and the quantity demanded of that good

Answer 12

Demand curve

Question 13

Demand of one individual

Answer 13

Individual demand

Question 13

The prices of the land, labor, and capital that are used to produce output. As input prices increase, supply decreases because the cost of production increases. As input prices decrease, supply increases because the cost of production decreases.

Answer 13

Input prices

Question 14

When new methods of production are used that increase productivity (i.e. output increases with a given amount of inputs). An advance in technology increases supply because the cost of production decreases.

Answer 14

Advance in Technology

Question 15

The amount of a good that sellers are willing and able to produce

Answer 15

Quantity supplied

Question 16

The sum of all individual supply for a particular good or service (obtained by adding the individual quantities supplied at every price for each seller participating in the market)

Answer 16

Market supply

Question 16

Supply of one individual firm

Answer 16

Individual supply

Question 17

A table showing the relationship between the price of a good and the quantity supplied of that good

Answer 17

Supply schedule

Question 18

States the relationship between price and quantity supplied. It says that, ceteris paribus, the quantity supplied of a good falls when the price of a good falls (and the quantity supplied of a good rises when the price of a good rises)

Answer 18

Law of supply

Question 19

A graphical representation of the relationship between the price of a good and the quantity demanded of that good

Answer 19

supply curve

Question 20

The market-clearing price where the quantity of the good that buyers are willing and able to buy exactly equals the quantity that sellers are willing and able to sell

Answer 20

Equilibrium price

Question 21

The quantity for which quantity supplied equals quantity demanded

Answer 21

Equilibrium quantity

Question 22

The situation of excess demand that results when the market price is below equilibrium price and quantity demanded is greater than quantity supplied

Answer 22

Shortage

Question 23

The situation of excess supply that results when the market price is above equilibrium price and quantity supplied is greater than quantity demanded

Answer 23

Surplus

Question 24

a measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants.

Answer 24

Elasticity

Question 24

a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price

Answer 24

Price elasticity of demand

Question 25

Price controls are government policies that alter the private market outcome.

Answer 25

price control

Question 25

a measure of how much the quantity demanded of a good responds to a change in consumers’ income, computed as the percentage change in quantity demanded divided by the percentage change in income

Answer 25

Income elasticity of demand

Question 26

A legal maximum on the price of a good or service; for example, rent control.

Answer 26

price ceiling

Question 27

a measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price

Answer 27

Price elasticity of supply

Question 28

A legal minimum on the price of a good or service; for example, minimum wage.

Answer 28

Price floor

Question 28

price control is non-binding if it has no effect on the market outcome, and the market can continue to operate at equilibrium.

Answer 28

non-binding

Question 29

A price control is binding if it changes the market outcome to a different price and different quantity from equilibrium, because the equilibrium price is now considered illegal.

Answer 29

Binding