Chapter 3 Study Guide

Topics: Supply and demand, Consumer theory, Marginal utility Pages: 2 (452 words) Published: August 31, 2013
Samantha Becicka
Macro Study Guide
Chapter 3
1 We have scarce resources so in our choices of consumption we wish to maximize the satisfaction we receive from those choices. The economist terms this maximizing the __utility_________ 2 Since it is unlikely that we can grow our own food, sew our own clothes or build our house, it would be better if we would __specialize___ in what we do best and __exchange_ for those needs that others do better 3 The term _product market___ is a place where and economic exchange occurs between buyers and sellers. 4 There is a, an (inverse, direct)_inverse__ relationship between the price of a good and the quantity we will purchase. This is the law of __demand______ 5 The demand curve slopes (upward, downward) __downward___ left to right. 6 When _ceteris Paribus____ assumption is ignored, the demand curve will _shift_______ 7 The demand curve does not represent what we buy at a certain price level but what we __are willing and able__ to buy at that price. 8 The supply curve slopes (upward, downward) __upward___ left to right. 9 Larger quantities will be offered for sale as prices increase is the law of _supply__. 10 Another name for equilibrium in supply and demand is _market clearing_____ 11 When a minimum price or _price floor_ is placed on a product a _market surplus__ will be created due to _supply__ being greater than __demand__ 12 When a maximum price or _price ceiling_ is placed on a product a _market shortage___ will be created due to _demand___ being greater than _supply___

Explain the difference in the changes in demand and quantity demanded. Determinants of demand are tastes, income, substitute and complimentary goods, expectations and, number of buyers. Demand can changed based on any of these factors it really just depends on the situation surrounding the buyer and how badly they need or want the product. However, quantity demanded refers more to the amount a producer can be expected to sell. This will...
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