EC Final Exam
Market - Answer-a group of buyers and sellers of a particular product
Competitive Market - Answer-is one with many buyers and sellers, each has a negligible effect on price.
Quantity Demanded (QD) - Answer-of any good is the amount of the good that buyers are willing and
able to purchase at a specific price. QD is a point on the demand curve.
Demand Curve - Answer-§is a set of various quantities demanded (QD) at corresponding prices. It is the
curve itself.
Law of Demand - Answer-the claim that the quantity demanded of a good falls when the price of the
good rises, other things equal.
Demand Schedule - Answer-a table that shows the relationship between the price of a good and the
quantity demanded.
Market Demand v. Individual Demand - Answer-The quantity demanded in the market is the sum of the
quantities demanded by all buyers at each price. QD1 + QD2= Market QD
Shifts in Demand Curve - Answer-Any change that raises the quantity that buyers wish to purchase at
any given price shifts the demand curve to the right. Any change that lowers the quantity that buyers
wish to purchase at any given price shifts the demand curve to the left.
,(Demand Curve Shifters) # of Buyers - Answer-Increase in # of buyers increases quantity demanded at
each price, shifts D curve to the right. Suppose the number of buyers increases. Then, at each point the
demand will increase by that number.
(Demand Curve Shifters) Income - Answer-Demand for a normal good is positively related to
income.Increase in income causes increase in quantity demanded at each price, shifts D curve to the
right.(Demand for an inferior good is negatively related to income. An increase in income shifts D curves
for inferior goods to the left.)
Normal Good - Answer-a good that consumers demand more of when their incomes increase
Inferior Good - Answer-a good that consumers demand less of when their incomes increase
(Demand Curve Shifters) Prices of Related Goods- Subsitutes - Answer-Two goods are substitutes if an
increase in the price of one causes an increase in demand for the other. Ex. Crest & Colgate, and
increase in the price of Crest toothpaste increases demand for Colgate toothpaste, shifting the Colgate
demand curve to the right.
(Demand Curve Shifters) Prices of Related Goods- Complements - Answer-Two goods are complements
if an increase in the price of one causes a fall in demand for the other. Ex. computers and software. If
price of computers rises, people buy fewer computers, and therefore less software. Software demand
curve shifts left.
(Demand Curve Shifters) Tastes - Answer-Anything that causes a shift in tastes toward a good will
increase demand for that good and shift its D curve to the right.
Ex. The Atkins diet became popular in the '90s, caused an increase in demand for eggs, shifted the egg
demand curve to the right.
Anything that causes a shift in tastes away from a good will decrease demand for that good and shift its
D curve to the left.
Ex. 2017 was the "Retail Apocalypse" with American Apparel, Aeropostale, Payless Shoes, rue21,
PacSun, Limited, Wet Seal, Gymboree, BCBG Max Azria, True Religion, Gander Mountain, HHGregg, filing
,for bankruptcy closing stores and it continue to 2019 with Toys R Us, Forever 21, Charlotte Russe, and
many others closing hundreds of stores.
(Demand Curve Shifters) Expectations - Answer-Expectations affect consumers' buying decisions.
Ex.
- If people expect their incomes to rise, their demand for meals at expensive restaurants may increase
now.
- If the economy sours and people worry about their future job security, demand for new autos may fall
now.
Variables that Influence Buyers - Answer-1. Price- causes movement along D curve.
2. # of buyers- shifts the D curve.
3. Income- shifts the D curve.
4. Price of Related Goods- shifts the D curve.
5. Tastes- shifts the D curve.
6. Expectations- shifts the D curve.
Quantity Supplies (QS) - Answer-of any good is the amount that sellers are willing and able to sell at a
specific price. QS is a point on the supply curve.
Supply Curve - Answer-is a set of various quantities supplied (QS) at corresponding prices.
Law of Supply - Answer-the claim that the quantity supplied of a good rises when the price of the good
rises, other things equal
Supply Schedule - Answer-A table that shows the relationship between the price of a good and the
quantity supplied.
, Market Supply v. Individual Supply - Answer-The quantity supplied in the market is the sum of the
quantities supplied by all sellers at each price. QS1 + QS2= Market QS
Shifts in the Supply Curve - Answer-Any change that raises the quantity that sellers wish to produce at
any given price shifts the supply curve to the right. Any change that lowers the quantity that sellers wish
to produce at any given price shifts the supply curve to the left.
(Supply Curve Shifters) Input Prices - Answer-A fall in input prices makes production more profitable at
each output price, so firms supply a larger quantity at each price, and the S curve shifts to the right.
Ex. wages, prices of raw materials
(Supply Curve Shifters) Technology - Answer-§Technology determines how much inputs are required to
produce a unit of output.
A cost-saving technological improvement has the same effect as a fall in input prices, shifts S curve to
the right.
(Supply Curve Shifters) # of Sellers - Answer-An increase in the number of sellers increases the quantity
supplied at each price,
shifts S curve to the right.
(Supply Curve Shifters) Expectations - Answer-In general, sellers may adjust supply* when their
expectations of future prices change. (*If the good is not perishable)
Ex. Events in the Middle East lead to expectations of higher oil prices.
In response, owners of Texas oilfields reduce supply now, save some inventory to sell later at the higher
price.
S curve shifts left.
Variables that Influence Sellers - Answer-1. Price- causes a movement along the S curve.
2. Input prices- shifts the S curve.
Market - Answer-a group of buyers and sellers of a particular product
Competitive Market - Answer-is one with many buyers and sellers, each has a negligible effect on price.
Quantity Demanded (QD) - Answer-of any good is the amount of the good that buyers are willing and
able to purchase at a specific price. QD is a point on the demand curve.
Demand Curve - Answer-§is a set of various quantities demanded (QD) at corresponding prices. It is the
curve itself.
Law of Demand - Answer-the claim that the quantity demanded of a good falls when the price of the
good rises, other things equal.
Demand Schedule - Answer-a table that shows the relationship between the price of a good and the
quantity demanded.
Market Demand v. Individual Demand - Answer-The quantity demanded in the market is the sum of the
quantities demanded by all buyers at each price. QD1 + QD2= Market QD
Shifts in Demand Curve - Answer-Any change that raises the quantity that buyers wish to purchase at
any given price shifts the demand curve to the right. Any change that lowers the quantity that buyers
wish to purchase at any given price shifts the demand curve to the left.
,(Demand Curve Shifters) # of Buyers - Answer-Increase in # of buyers increases quantity demanded at
each price, shifts D curve to the right. Suppose the number of buyers increases. Then, at each point the
demand will increase by that number.
(Demand Curve Shifters) Income - Answer-Demand for a normal good is positively related to
income.Increase in income causes increase in quantity demanded at each price, shifts D curve to the
right.(Demand for an inferior good is negatively related to income. An increase in income shifts D curves
for inferior goods to the left.)
Normal Good - Answer-a good that consumers demand more of when their incomes increase
Inferior Good - Answer-a good that consumers demand less of when their incomes increase
(Demand Curve Shifters) Prices of Related Goods- Subsitutes - Answer-Two goods are substitutes if an
increase in the price of one causes an increase in demand for the other. Ex. Crest & Colgate, and
increase in the price of Crest toothpaste increases demand for Colgate toothpaste, shifting the Colgate
demand curve to the right.
(Demand Curve Shifters) Prices of Related Goods- Complements - Answer-Two goods are complements
if an increase in the price of one causes a fall in demand for the other. Ex. computers and software. If
price of computers rises, people buy fewer computers, and therefore less software. Software demand
curve shifts left.
(Demand Curve Shifters) Tastes - Answer-Anything that causes a shift in tastes toward a good will
increase demand for that good and shift its D curve to the right.
Ex. The Atkins diet became popular in the '90s, caused an increase in demand for eggs, shifted the egg
demand curve to the right.
Anything that causes a shift in tastes away from a good will decrease demand for that good and shift its
D curve to the left.
Ex. 2017 was the "Retail Apocalypse" with American Apparel, Aeropostale, Payless Shoes, rue21,
PacSun, Limited, Wet Seal, Gymboree, BCBG Max Azria, True Religion, Gander Mountain, HHGregg, filing
,for bankruptcy closing stores and it continue to 2019 with Toys R Us, Forever 21, Charlotte Russe, and
many others closing hundreds of stores.
(Demand Curve Shifters) Expectations - Answer-Expectations affect consumers' buying decisions.
Ex.
- If people expect their incomes to rise, their demand for meals at expensive restaurants may increase
now.
- If the economy sours and people worry about their future job security, demand for new autos may fall
now.
Variables that Influence Buyers - Answer-1. Price- causes movement along D curve.
2. # of buyers- shifts the D curve.
3. Income- shifts the D curve.
4. Price of Related Goods- shifts the D curve.
5. Tastes- shifts the D curve.
6. Expectations- shifts the D curve.
Quantity Supplies (QS) - Answer-of any good is the amount that sellers are willing and able to sell at a
specific price. QS is a point on the supply curve.
Supply Curve - Answer-is a set of various quantities supplied (QS) at corresponding prices.
Law of Supply - Answer-the claim that the quantity supplied of a good rises when the price of the good
rises, other things equal
Supply Schedule - Answer-A table that shows the relationship between the price of a good and the
quantity supplied.
, Market Supply v. Individual Supply - Answer-The quantity supplied in the market is the sum of the
quantities supplied by all sellers at each price. QS1 + QS2= Market QS
Shifts in the Supply Curve - Answer-Any change that raises the quantity that sellers wish to produce at
any given price shifts the supply curve to the right. Any change that lowers the quantity that sellers wish
to produce at any given price shifts the supply curve to the left.
(Supply Curve Shifters) Input Prices - Answer-A fall in input prices makes production more profitable at
each output price, so firms supply a larger quantity at each price, and the S curve shifts to the right.
Ex. wages, prices of raw materials
(Supply Curve Shifters) Technology - Answer-§Technology determines how much inputs are required to
produce a unit of output.
A cost-saving technological improvement has the same effect as a fall in input prices, shifts S curve to
the right.
(Supply Curve Shifters) # of Sellers - Answer-An increase in the number of sellers increases the quantity
supplied at each price,
shifts S curve to the right.
(Supply Curve Shifters) Expectations - Answer-In general, sellers may adjust supply* when their
expectations of future prices change. (*If the good is not perishable)
Ex. Events in the Middle East lead to expectations of higher oil prices.
In response, owners of Texas oilfields reduce supply now, save some inventory to sell later at the higher
price.
S curve shifts left.
Variables that Influence Sellers - Answer-1. Price- causes a movement along the S curve.
2. Input prices- shifts the S curve.
