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Macro Economics 103 > Macro Economics Chapter 03 Power Point > Flashcards

Macro Economics Chapter 03 Power Point Flashcards

2
Q

Why is this chapter 3 important?

A

•It introduces basic supply and demand analysis

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3
Q

What is demand?

A

•Demand represents the choice making behavior of buyers

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4
Q

What does “ceteris paribus” mean?

A

•All else remains the same

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5
Q

What is the law of demand?

A

•There is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus

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6
Q

What is a demand schedule?

A

•Shows the quantities of a good or service that people are willing and able to buy at different prices

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7
Q

Explain a Demand schedule

A

An individual buyer’s Demand schedule for buying DVDs.point price for DVD Quantity per yearA $20 4B $15 6C $10 10D $5 16

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8
Q

What is a demand curve?

A

•Depicts the relationship between price and quantity demanded

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9
Q

Why do demand curves have a negative slope?

A

•At a higher price buyers will buy fewer units, and at a lower price they will buy more units

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10
Q

What is market demand?

A

•The summation of the individual demand schedules in a market

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11
Q

Describe an Market demand schedule

A

Market Demand Schedule for DVDs Quantity Demanded per YearPrice per DVD Fred + Mary = Total Demand$25 1 0 1$20 2 1 3$15 3 2 5$10 4 5 9

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12
Q

IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY DEMANDED AND A CHANGE IN DEMAND

A

IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY DEMANDED AND A CHANGE IN DEMAND

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13
Q

When price changes, what happens?

A

•The curve does not shift - there is a change in the quantity demanded

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14
Q

Change in price causes???

A

Change in Quantity Demanded

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15
Q

If a price decreases describe how it effects the S & D graph.

A

Downward movement along the demand curve.Increase in quantity demanded

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16
Q

If a price increases describe how it effects the S & D graph.

A

Upward movement along the demand curveDecrease in quantity demanded

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17
Q

When something changes other than price, what happens?

A

•The whole curve shifts,there is a change in demand

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18
Q

Change in nonprice determinant causes a change in demand or change in quantity demanded?

A

Change in demand

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19
Q

If a there is a change in a non price determinant describe how it effects the S & D graph.

A

Leftward or rightward shift in the demand curveDecrease or increase in demand

20
Q

What can cause a demand curve to shift? A change in:

A

Number of buyers in the market•Tastes and preferences•Income•Expectations•Prices of related goods

21
Q

What is the conclusion with price and demand?

A

•Changes in nonprice determinants can produce only a shift in a demand curve and not a movement along the demand curve

22
Q

What is a normal good?

A

•Any good for which there is a direct relationship between changes in income and its demand curve

23
Q

What is an inferior good?

A

•Any good for which there is an inverse relationship between changes in income and its demand curve

24
Q

What are substitute goods?

A

•Goods that compete with one another for consumer purchases

25
Q

What happens when the price increases for a good that has a substitute?

A

•The demand curve for the substitute good increases

26
Q

What happens when the price decreases for a good that has a substitute?

A

•The demand curve for the substitute good decreases

27
Q

What does a direct relationship between price and quantity mean?

A

•The two move in the same direction

28
Q

What are complementary goods?

A

•Goods that are jointly consumed with another good

29
Q

What happens when the price increases for a good that has a complement?

A

•The demand curve for the substitute good decreases

30
Q

What happens when the price decreases for a good that has a complement?

A

•The demand curve for the substitute good increases

31
Q

What does an inverse relationship between price & quantity mean?

A

•It means that the two move in opposite directions

32
Q

What is supply?

A

•Supply represents the choice making behavior of sellers

33
Q

What is the law of supply?

A

•There is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus

34
Q

Why do supply curves have a positive slope?

A

•Only at a higher price will it be profitable for sellers to incur the higher opportunity cost associated with supplying a larger quantity

35
Q

What is market supply?

A

•The horizontal summation of all the quantities supplied at various prices that might prevail in the market

36
Q

IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY SUPPLIED AND A CHANGE IN SUPPLY

A

IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY SUPPLIED AND A CHANGE IN SUPPLY

37
Q

When price changes, what happens?

A

•The curve does not shift - there is a change in the quantity supplied

38
Q

Change inPrice effects?

A

Change in Quantity Supplied

39
Q

When something changes other than price, what happens?

A

•The whole curve shifts - there is a change in supply

40
Q

Change in nonprice determinant causes???

A

Change in supply

41
Q

What can cause a supply curve to shift? A change in:

A

•Number of sellers in the market•Technology•Resource prices•Taxes and subsidies•Expectations of producers•Prices of other goods the firm could produce

42
Q

What is the conclusion?

A

•Changes in nonprice determinants can produce only a shift in a supply curve and not a movement along the supply curve

43
Q

What is a market?

A

•Any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged

44
Q

What is the equilibrium price?

A

•The price towards which the economy tends

45
Q

Where is the equilibrium price?

A

•At the price where the quantity demanded and the quantity supplied are equal

Macro Economics 103 (47 decks)

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