Macroeconomics Review

Front 1

market

Back 1

consists of all buyers or sellers of a good

Front 2

demand curve

Back 2

a schedule or graph showing the quantity of a good that buyers wish to buy at each price

Front 3

substitution effect

Back 3

the change in the qunatity demanded of a good that buyers wish to buy at each price

Front 4

income effect

Back 4

the change in the quantity demanded of a good that results because a change in the price of a good changes the buyers purchasing power

Front 5

buyers reservation price

Back 5

the largest dollar amount the buyer would be willing to pay for a good

Front 6

supply curve

Back 6

a curve or schedule showing the quantity of a good that sellers wish to sell at each price

Front 7

sellers reservation price

Back 7

the smallest dollar amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost

Front 8

equilibrium

Back 8

a system is in equilibrium when there is no tendency for it to change

Front 9

equilibrium price and equilibrium quantity

Back 9

the values of price and quantity for which quantity supplied and quantity demanded are equal

Front 10

market equilibrium

Back 10

occurs in a market when all buyers and sellers are satisfied with their respective quantities at the market place

Front 11

excess supply

Back 11

the amount by which quantity supplied exceeds quantity demanded when the price of a good exceeds the equilibrium price

Front 12

excess demand

Back 12

the amount by which quantity demanded exceeds quantity supplied when the price of a good lies below the equilibrium price

Front 13

price ceiling

Back 13

a maximum allowable price, specified by law

Front 14

change in quantity demanded

Back 14

a movement along the damand curve that occurs in response to a change in price

Front 15

change in demand

Back 15

a shift of the entire demand curve

Front 16

change in supply

Back 16

a shift of the entire supply curve

Front 17

change in the quantity supplied

Back 17

a movement along the supply curve that occurs in response to a change price

Front 18

complements

Back 18

occurs when an increase in the price of one good causes a leftward shift in the demand curve for the other (or if a decrease causes a rightward shift)

Front 19

substitutes

Back 19

occurs when in consumption an increase in the price of one good causes a rightward shift in the demand curve for the other (or if a decrease causes a leftward shift)

Front 20

normal good

Back 20

one whose demand curve shifts rightward when the incomes of buyers increase and leftward when the incomes of buyers decrease

Front 21

inferior good

Back 21

one whose demand curve shifts leftward when the incomes of buyers increase and rightward when the incomes of buyers decrease

Front 22

buyers surplus

Back 22

the difference between the buyers reservation price and the price he or she actually pays

Front 23

sellers surplus

Back 23

the difference between the price received by the seller and his/her reservation price

Front 24

total surplus

Back 24

the difference between the buyers reservation price and the sellers reservation price

Front 25

cash on the table

Back 25

economic metaphor for unexploited gains from exchange

Front 26

socially optimal quantity

Back 26

the quantity of a good that results in the maximum possible economic surplus from producing and consuming the good

Front 27

efficiency (economic efficiency)

Back 27

occurs when all goods and services are produced and consumed at their respective socially optimal levels

Front 28

Sellers generally offer more units for sale at higher/lower prices?

Back 28

higher prices

Front 29

Factors that cause an increase (rightward or upward shift) in demand:

Back 29

1)decrease in price of complements
2)increase in price of substitutes
3)increase in income
4)increased preferance by demanders
5)increase in population of potential buyers
6)expactation of higher prices in future

Front 30

Factors that cause an increase (rightward or downward shift) in supply:

Back 30

1)decrease in cost of materials, labor, or other inputs used in production
2)improvement of technology that reduces cost of production
3)improvement in the weather
4)increase in number of suppliers
5)expectation of lower prices in the future

Front 31

An increase in demand will lead to a(n) __________ in both the equilibrium price and quantity.

Back 31

increase

Front 32

A decrease in demand will lead to a(n) __________ in both the equilibrium price and quantity.

Back 32

decrease

Front 33

An increase in supply will lead to a(n) __________ in the equilibrium price and
a(n) __________ in the equilibrium quantity.

Back 33

decrease; increase

Front 34

A decrease in supply will lead to an __________ in the equilibrium price and a __________ in the equilibrium quantity.

Back 34

increase; decrease

Front 35

Prices are __________ during the period of heaviest consumption is the result of high demand.

Back 35

highest

Front 36

Prices are __________ during the period of heaviest consumption when heavy consumption is the result of high supply.

Back 36

lowest