| A | B |
|---|
| An increase in the price of a substitute good would cause the demand for the original good to | decrease |
| A decrease in the price of a substitute would _________ the demand for a normal good. | decrease |
| When does a surplus occur? | When price is above equilibrium (price floor) |
| When does a shortage occur? | When price is below the equilibrium (price ceiling) |
| If employees orangize a union and negotiate a pay increase, what will happen to supply? | decrease |
| When a price floor above the equilibrium creates a surplus, what would reduce the surplus? | lowering the price (eliminating the surplus) |
| In moving from a shortage toward equilibrium, price _______. | increases |
| ________ is when people make decisions by examining the effects of small additions to or subtractions from their current situation | marginal analysis |
| a statement that is objective and descriptive (fact) | positive statement |
| a statement of how the world ought to be | normative statement |
| the amount that consumers are willing and able to purchase in a given period of time at a given price | quantity demanded |
| According to the law of demand, quantity demanded _____ as price increases. | decreases |
| 5 non-price determinants of demand | tastes & preferences, consumer expectations, income, price & availability, number of buyers |
| A normal good is a good whose demand ____ as income increases. | increases |
| An inferior good is a good whose demand decreases as income ______. | increases |
| when there is a change in ____ there is a change in quantity demanded. | price |
| A change in quantity demanded does what to the curve? | movement along the curve |
| When there is a change in demand, what happens to the curve? | shift |
| The _____ of a good is the amount that producers are willing and able to sell at a given time and price. | quantity supplied |
| The law of supply states that the quantity supplied increases, as the price | increases |
| Opportunity costs rise as the quantiy of a good ______ | increases |
| When price changes, what happens to the supply curve? | movement along the curve |
| A change in quantity supply occurs when _____ changes. | price |
| 6 non-price determinants of supply | expectations, number of sellers, resource prices, prices of other goods, changes in technology, taxes & subsidiaries |
| When there is a change in a determinant of supply, what happens to the curve? | shift |
| how are market price and quantity determined? | by the process of equilibrium |
| When does equilibrium occur? | When the quantity demanded equals the quantity supplied. |
| How do markets get to equilibrium? | price adjustment |
| When quantity demanded is greater than quantity supplied, there is a | shortage |
| when quantity supplied is greater than the quantity demanded, there is a | surplus |
| If there is a simultaneous change in demand and supply, what will be the impact on equilibrium price or quantity | it will be uncertain |
| When does market failure occur? | when markets don't perform the way we want them to |
| the maximum price that a firm may charge for its product | price ceiling |
| the minimum price that a firm must receive for its product | price floor |
| What happens when a price floor is below the equilibrium? | the market will go to equilibrium on its own |
