ECN 201 Ch. 3 + 4 – Flashcards
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demand
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willingness/ability of buyers to purchase different quantities of a good at different prices during a specific time period
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law of demand
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as price of good rises, quantity demanded of good falls
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At a price of $15, Marta buys 3 CD's per month. When the price increases to $20, Marta buys 2 CD's per month. Luz says that Marta's demand for CD's has decreased. Is Luz correct?
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no; only her quantity demanded has decreased
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If the demand for computer software rises as incomes rise, then computer software is a (an):
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normal good
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inferior good
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when income rises, demand falls
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normal good
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when income rises, demand rises
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neutral good
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rise/fall in income does not cause demand to change
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Two goods are substitutes if...
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demand for one rises as price of other rises
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Two goods are complements if...
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demand for one rises as price of other falls
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Given that frozen yogurt and ice cream are substitutes, a shift in preferences in favor of yogurt would be predicted to do all of the following EXCEPT:
a. raise the equilibrium price of frozen yogurt.
b. increase the quantity supplied of frozen yogurt.
c. increase the supply of ice cream.
d. increase the demand for frozen yogurt.
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c. increase supply of ice cream
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An increase in the price of tartar sauce caused a decrease in the demand for fish. This indicates that
a. tartar sauce and fish are complements.
b. tartar sauce and fish are substitutes.
c. tartar sauce and fish are neither substitutes nor complements.
d. tartar sauce and fish are normal goods.
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a. tartar sauce and fish are complements
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shift factors of demand curves
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1. income
2. preferences
3. prices of related goods
4. number of buyers
5. expectations of future price
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movement factors of both supply and demand curves
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change in good's own price
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supply
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willingness/ability of sellers to produce/offer to sell different quantities of a good at different prices
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law of supply
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as price of good rises, quantity supplied of good rises
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One reads the following in a newspaper: "Today the president and Congress agreed to impose new restrictive quotas on Japanese cars coming into the of country." As a result, an economist would predict that...
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supply of cars in country will fall and the (average) price of cars will in rise
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shift factors of supply curves
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1. prices of relevant sources
2. technology
3. prices of other goods
4. number of sellers
5. expectations of future price
6. taxes/subsidies
7. government restrictions
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surplus
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quantity supplied > quantity demanded
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shortage
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quantity supplied < quantity demanded
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equilibrium price
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price at which quantity demanded of good = quantity supplied
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If the recording industry were to sue companies that make downloading music possible, we would expect...
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supply for downloaded music shifts left, price of downloaded music increases
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consumer surplus
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CS = maximum buying price - price paid
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producer surplus
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PS = price received - minimum selling price
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total surplus
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TS = CS + PS
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price floor
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government-mandated minimum price
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price ceiling
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government-mandated maximum price
