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Terms in this set (32)Supply and demand Are the forces that make market economies work. They determine the quantity of each good produced and the price at which it is sold. Market A group of buyers and sellers of a particular good or service What is a market The buyers as a group determine the demand for the product, and the sellers as a group determine the supply of the product Competitive market A market in which there are many buyers and many sellers so that each has a negligible impact on the market price. Perfectly competitive To reach this highest form of competition, a market must have 2 characteristics: 1. The goods offered for sale are all exactly the same. 2. The buyers and sellers are so numerous that no single buyer or seller has any influence over the market price. Quantity demanded Amount of a good that buyers are willing and able to purchase
Law of demand The quantity DEMANDED of a good falls when the when the price of a good rises, and vice versa, provided all other factors that affect buyers decisions are unchanged. Demand Full description of how the quantity demanded changes as the price of the commodity changes Quantity demanded of a consumer good depends on: - The price of ice cream. The law of demand says That the quantity demanded of a good is inversely (negatively) related to its price, provided all other factors are unchanged Demand schedule Table that shows the relationship between the price of a good and the quantity demanded Demand curve A graph of the relationship between the price of a good and the quantity demanded. Price is on the vertical, and quantity demanded on the horizontal. Market demand The sum of all the individual demands for a particular good or service . Shifts in the market demand curve Are caused by changes in : Shifts in the demand curve Consumer
income: Prices of related goods: Substitutes
when a FALL in the price of one good REDUCES the demand for ANOTHER good Complements when a FALL in the price of one good INCREASES the demand for ANOTHER good, Law of demand explanations - substitution effect Substitution effect When the price of a good decreases, consumers substitute that good instead of other competing (substitute) goods Lower prices = higher income A fall in prices is equivalent to an increase in income Income effect A decrease in the price of a commodity is essentially equivalent to an increase in consumers income. Supply Full description of how the quantity supplied of a commodity responds to changes in its price Quantity supplied Is the amount of a good that sellers are willing and able to sell The law of supply The QUANTITY supplied of a good rises when the price of the good rises, as long as all other factors that affect suppliers decisions are unchanged Shifts in the supply curve Caused by changes in: The market supply will shift if: Equilibrium We assume that the price will automatically reach a level at which the quantity demanded equals the quantity supplied When markets are not in equilibrium You have a surplus or a shortage Surplus - when price EXCEEDS equilibrium price, the. Quantity supplied
is GREATER than quantity demanded Shortage When price is LESS than equilibrium price, then quantity demanded EXCEEDS the quantity supplied Normal good Increase in income will result in an increase for the demand of the good Inferior good Decrease in income increases the demand for the good Substitutes 2 goods. If a decrease in the price of one good decreases the demand for another good. Recommended textbook solutions
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ECONOMICS Given the following regression equation, Ŷ = 7 - .5X, and that the coefficient of determination is 0.81, answer the question. An increase of 1 unit in the independent variable will result in what amount of an increase or decrease in the dependent variable? Verified answer
ECONOMICS Consider the following limit order book for a share of stock. The last trade in the stock occurred at a price of $50.$ $$ \begin{matrix} \text{Limit Buy Orders} & \text{ } & \text{Limit Sell Orders}\\ \text{Price} & \text{Shares} & \text{Price} & \text{Shares}\\ \text{49.75} & \text{500} & \text{50.25} & \text{100}\\ \text{49.50} & \text{800} & \text{51.50} & \text{100}\\ \text{49.25} & \text{500} & \text{54.75} & \text{300}\\ \text{49.00} & \text{200} & \text{58.25} & \text{100}\\ \text{48.50} & \text{600} & \text{ } & \text{ }\\ \end{matrix} $$ $ At what price would the next market buy order be filled? Verified answer
ECONOMICS The National Aeronautics and Space Administration (NASA) has experienced two disasters. The Challenger exploded over the Atlantic Ocean in 1986, and the Columbia disintegrated on reentry over East Texas in 2003. Based on the first 113 missions, and assuming failures occur at the same rate, consider the next 23 missions. What is the probability of exactly two failures? What is the probability of no failures? Verified answer
ECONOMICS The state of Maine has a very active lobster industry, which harvests lobsters during the summer months. During the rest of the year, lobsters can be obtained by restaurants from producers in other parts of the world, but at a much higher price. Maine is also full of "lobster shacks," roadside restaurants serving lobster dishes that are open only during the summer. Supposing that the market demand for lobster dishes remains the same throughout the year, explain why it is optimal for lobster shacks to operate only during the summer. Verified answer Other Quizlet setsExam 2 - Clicker Questions 3/23/1713 terms Tyler384 Accounting 1: Exam 1169 terms katherinecraven Tema 1 Economía Internacional17 terms quizlette59700727 OPNAVINST 6100.3A DEPLOYMENT HEALTH ASSESSMENT PRO…21 terms amethystpersechino Related questionsQUESTION There are 10 rolls of film in a box and 3 are defective. Two rolls are to be selected without replacement. What is the probability of selecting a defective roll followed by another defective roll? 6 answers QUESTION If the price of a complement falls the demand curve will shift to the (right/left)? 2 answers QUESTION If a surplus exists in a market, we know the actual price is 4 answers QUESTION Game theory is used to explain firms' decisions in 15 answers When the rise in the price of a good causes decrease in demand for another good two called goods?There lies an inverse relationship between the price of one complementary good and the demand for another complementary good, since the complementary goods are required to be consumed together. Thus, with the rise in price of one commodity, which is a complementary good, the demand for the other decreases.
When two goods are complements a shock that lowers the price of one good causes the price of the other good to?a. If two goods are complements, a decrease in the price of one good will cause the demand for the other good to decrease. b. If two goods are substitutes, an increase in the price of one good causes the demand for the other good to increase.
What happens when the price of a good falls?If the price of a good falls, the quantity demanded of that good increases. The relationship between the quantity demanded and the price of a good when all other influences on buying plans remain the same. Demand is a list of quantities at different prices and is illustrated by the demand curve.
What happens when two goods are complements?When two goods are complements, they experience joint demand - the demand of one good is linked to the demand for another good. Therefore, if a higher quantity is demanded of one good, a higher quantity will also be demanded of the other, and vice versa.
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When a fall in the price of one good reduces the demand for another good, the two goods are called
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