Chapter 3: Markets, Demand And Supply, And The Price System

Front 1

Any institution or mechanism which brings together buyers and sellers of a particular good or service.

Back 1

Market

Front 2

Amounts of a good or service buyers (or a buyer) wish to purchase at various prices during some time period.

Back 2

Quantity Demanded

Front 3

The principle that other things equal an increase in a product’s price will reduce the quantity of it demanded; and conversely for a decrease in price.

Back 3

Law of demand

Front 4

Goods whose benefits to society are not diminished as more people consume them and whose benefits cannot be withheld from anyone.

Back 4

public goods

Front 5

People who enjoy the benefits of a public good without paying for them.

Back 5

free rider

Front 6

As “baby-boomers” reach the age of 65, what impact will this have on the price and quantity for pharmaceuticals?

Use Macro-links to Answer

Back 6

Baby boomers” reaching the age of 65 causes an increase in demand for pharmaceuticals which then causes an increase in the price and the quantity of pharmaceuticals.

Front 7

If there is an increase in the number of consumers (buyers), what impact will this have on the price and quantity for pillows?

Use Macro-links to Answer

Back 7

An increase in the number of consumers causes an increase in demand for pillows which then causes an increase in the price and the quantity of pillows.

Front 8

If there is a decrease in the number of consumers (buyers), what impact will this have on the price and quantity for diamonds?

Use Macro-links to Answer

Back 8

Decrease in the number of consumers causes a decrease in demand for diamonds which then causes a decrease in the price and quantity of diamonds.

Front 9

If consumers (buyers) suspect prices for wedding dresses will go up some time in the next six months, what impact will this have on the price and quantity for wedding dresses?

Use Macro-links to Answer

Back 9

If consumers suspect prices for wedding dresses will go up in the future, this would cause an increase in demand for wedding dresses which then cause an increase in the price and the quantity of wedding dresses.

Front 10

If there is an increase in the consumer (buyer) income, what impact will this have on the price and quantity for an “inferior” good?

Use Macro-links to Answer

Back 10

An increase in income causes a decrease in demand for inferior goods which then causes a decrease in the price and quantity of inferior goods.

Front 11

If technological advances in the furniture manufacturing field are made, what impact will this have on the price and quantity for a furniture?

Use Macro-links to Answer

Back 11

Increase in technology causes an increase in supply of furniture which then causes a decrease in the price of furniture and an increase in the quantity of furniture.

Front 12

If motorcycle manufacturers suspect that motorcycle prices will increase significantly in the future, what impact will this have on the price and quantity for motorcycles?

Use Macro-links to Answer

Back 12

As motorcycle manufacturers hoard their existing inventory waiting for higher prices, this causes a decrease in supply of motorcycle which then causes an increase in the price of motorcycle and a decrease in the quantity of motorcycle.

Front 13

If farmers find they can make a higher profit growing soy beans than cotton, what impact will this have on the price and quantity for cotton?

Use Macro-links to Answer

Back 13

If farmers leave the cotton market to pursue the higher profit soy beans, this causes a decrease in supply of cotton which then causes an increase in the price of cotton and a decrease in the quantity of cotton.

Front 14

If farmers find they can make a higher profit growing soy beans than cotton, what impact will this have on the price and quantity for soy beans?

Use Macro-links to Answer

Back 14

If farmers pursue the higher profit soy bean market this causes an increase in soy beans which then causes a decrease in the price of soy beans and a increase in the quantity of soy beans.

Front 15

If the government passes a law requiring all businesses to provide company-paid health insurance for all its employees, what impact will this have on the price and quantity for most products?

Use Macro-links to Answer

Back 15

If the government passes a law requiring all businesses to provide company-paid health insurance for all its employees, this causes a decrease in supply of most products which then causes an increase in the price of most products and a decrease in the quantity of most products.

Front 16

If the price of peanut butter increases, what impact will this have on the price and quantity for jelly?

Use Macro-links to Answer

Back 16

An increase in the price of peanut butter will cause a decrease in demand for its complement good, jelly, which then causes a decrease in the price and quantity of jelly.

Front 17

If the price of Coke increases, what impact will this have on the price and quantity for Pepsi.

Use Macro-links to Answer

Back 17

If the price of Coke increases this would cause an increase in demand for its substitute Pepsi which then cause an increase in the price and the quantity of Pepsi.

Front 18

If the orange crops of Southern California have been destroyed due to large-scale fires, what impact will this have on the price and quantity for oranges?
Use Macro-links to Answer

Back 18

If orange crops are destroyed by fire, this causes a decrease in supply of oranges which then causes an increase in the price of oranges and a decrease in the quantity of oranges.

Front 19

If there is a shortage in the auto market, then the price of autos will __________.

Back 19

rise

Front 20

If the market price is $50,
a. this market will be in equilibrium.
b. a shortage of 27 units would result.
c. a surplus of 26 units would result.
d. a surplus of 27 units would result.

Back 20

If the market price is $50,
d. a surplus of 27 units would result.

Front 21

If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?
a. Take wheat from government storage and sell it.
b. Encourage farmers to use more fertilizer.
c. Lower the price of rye.
d. Encourage farmers to grow less wheat.

Back 21

d. Encourage farmers to grow less wheat.

Front 22

If Congress decides to increase the tax per pack paid by sellers of cigarettes, the price of cigarettes will rise. This rise in prices can be attributed to a (an):
a. upward movement along the supply curve for cigarettes.
b. rightward shift of the supply curve for cigarettes.
c. upward movement along the demand curve for cigarettes.
d. leftward shift of the supply curve for cigarettes

Back 22

d. leftward shift of the supply curve for cigarettes

Front 23

If the cost of fertilizer rises, what happens to the price and quantity of corn?

Use Macro-links to Answer

Back 23

Increase in fertilizer causes a decrease in supply of corn which then causes an increase in the price of corn and a decrease in the quantity of corn.

Front 24

If consumer income rises, what happens to the price and quantity of a normal good?

Use Macro-links to Answer

Back 24

Increase in consumer incomes causes an increase in demand for normal goods which then causes an increase in the price and the quantity of normal goods.

Front 25

If wages for construction workers decrease, what happens to the price and quantity of new homes?

Use Macro-links to Answer

Back 25

Decrease in wages causes an increase in supply of new homes which then causes an decrease in the price of new homes and a increase in the quantity of new homes.

Front 26

If consumer tastes change so that more people are eating broccoli, what happens to the price and quantity of its substitute cabbage?

Use Macro-links to Answer

Back 26

Change in preference toward broccoli causes an decrease in demand for its substitute cabbage which then causes an decrease in the price and quantity of cabbage.

Front 27

If the equilibrium price of aspirins is $2.50 and a price ceiling is imposed at $3.00, the eventual result after market adjustment will be a (an):
a. surplus.
b. shortage.
c. accumulation of inventories.
d. equilibrium.

Back 27

d. equilibrium.

Front 28

There was an extensive black market (illegal market) for many consumer products in the United States during World War II. A likely explanation of the black market is that:
a. the prices of goods were artificially held down by price controls.
b. black markets were legal during the war.
c. goods were not subject to price controls.
d. gasoline rationing greatly restricted civilians from driving to stores.

Back 28

a. the prices of goods were artificially held down by price controls.

Front 29

What does a price ceiling set below the equilibrium create?

Back 29

Shortage

Front 30

What does a price floor set above the equilibrium create?

Back 30

Surplus

Front 31

What is an unintended benefit or cost imposed on third parties as a result of economic activity?

Back 31

externality

Front 32

John planting fruit trees in his front yard, which attracts bees, which sting neighbor Mary is an example of a ______.

Back 32

negative externality

Front 33

Cindy discovers when she goes to the beach, she does not have to bring her radio. She can put her blanket near someone who has a radio and listen all day (without having to carry her radio, get sand in her speakers, or buy new batteries). This is an example of ____.

Back 33

positive externality