Week 3

Question 1

Perfectly competitive market if…

Answer 1

• Many buyers and sellers
• items are identical
• buyers and sellers can freely enter/exit
• buyers and sellers have full symmetric info

Question 2

Shift of the entire curve is called

Answer 2

Inc/dec in demand/supply

Question 3

Shift along the curve is called

Answer 3

change in quantity demanded/supplied, caused by change in price

Question 4

Ceteris paribus variables (demand)

Answer 4

Price of substitutes, Price of complements, Income, taste and preferences, population in market or market size

Question 5

Ceteris paribus variables (supply)

Answer 5

Price of factors of production, opportunity costs, science and technology, number of firms in the market

Question 6

Market equilibrium

Answer 6

where quantity demanded = quantity supplied

Question 7

above market equilibrium is

Answer 7

surplus

Question 8

below market equilibrium is

Answer 8

shortage

Question 9

price floor

Answer 9

minimum selling price, above equilibrium, ends up with surplus

Question 10

price ceiling

Answer 10

max price, below equilibrium, ends up with shortages

Question 11

quantity quotas

Answer 11

max amount of units must be sold bc too many are being traded

Question 12

commodity taxes**

Answer 12

• steeper slope bears more tax. when supply shifts, 3 important points are new equilibrium, old equilibrium, new quantity on old supply curve