Indicate the specific determinant of supply or demand

 Complements are goods that “work” together. An increase in the price of one of these goods causes
a decrease in the quantity demanded for that good. As a result, there will be a decrease in demand
for the complementary good.

 If the product is a type of clothing and a famous athlete or actor advertises the product, the
advertisement may change consumer tastes and preferences for the product, and the demand for
the product may increase.

 As the population ages, the number of people in the market for nursing home care increases and the
demand for nursing home care increases

 People’s expectations about the future may affect the demand for the good or service today. If
people expect the price of coffee to rise in the future, they may buy more cans/bags of coffee today
and store it.

 As the birth rate decreases, the number of people in the market for diapers and other baby items
decreases so the demand for these products decreases.

 If consumers like a product more based on their experience with the product or based on
advertising of the product, demand will increase and cause the entire demand curve to shift to the
right.

 To produce chocolate chip cookies, firms use various inputs such as eggs, sugar, chocolate, ovens,
machines, buildings and workers. The prices of these inputs play an important role in developing the
supply curve. If the prices of these inputs increase, producing cookies is less profitable, and the firm
will supply fewer cookies. If the prices of these inputs decrease, producing the cookies is more
profitable and the firm is willing and able to supply more cookies.

 If an oven is developed that allows cookie producers to bake cookies in half the time, the cookie
supply will increase.

 Banana producers obviously might not be able to stockpile their bananas, but producers of medical
equipment might be able to withhold their equipment from the market if they think prices will
increase in the future. In this case, a short-term decrease in the supply of medical equipment occurs.

 An expected increase in corn prices might cause some farmers to plant corn rather than soybeans,
thus increasing corn supply

 If nabisco stopped producing cookies, the supply of cookies would decrease because the number of
producers in the market would have decreased
 If a famous chef decides to produce and sell her signature cookies, the cookie supply would increase
because the number of producers has increased.

 The government gives tax subsidies to big-box stores in counties where the unemployment rate is
more than 7 percent. The government’s rationale is that big box stores provide jobs in the
community, the supply of big box stores increases.

 Buddy toys inc notices that the plastic piping for its production of hula-hoops has almost doubled in
price. Therefore, it decreases its production of hula hoops

 Keep it sharp inc has developed a laser cutter for textile production. This has cut the production time
per pair of jeans from three minutes to 90 seconds. Many jeans manufactures are using the new
laser cutter. The result is an increase in the jeans supply.

 The price of oil has increased and the supply of gasoline has decreased

 Cattle ranchers anticipate that prices for beef will fall because a highly influential celebrity makes
public statements questioning the practice of eating beef. Cattle ranchers hurry to sell their cattle,
which increases the beef supply.

 The use of 360-degree, zero-turn mowers allow lawn-service providers to mow twice as many lawns
in a given day. The supply of lawn service has increased.
 Indicate the determinants of supply

- Change in number of sellers

- Change in taxes or subsidies
- Change in input prices
- Change in technology
- Change in expectations

Indicate the prediction for each statement

 A hair dye is successfully advertised in the media. Its demand curve will shift?

Right

 People get tired of iPods. The demand curve for iPods will shift?

Left

 The price of butter goes up. The demand for margarine will?
Increase
 The prices of computers go down. People will by ________ software?

More

 The price of insulin goes down. Diabetics will use ____________?

The same amount

 The price of salt doubles. Shoppers will by?

The same amount

 The price of new automobiles goes up. The demand for used cars will?

Increase

 Strawberries are in season. The demand for frozen strawberries will?

Fall

 The cost of casting materials triples. A _____ ratio of patients with broken bones will get casts

Similar

 The price of beef falls. People will buy _______ beef

More

Indicate elastic or inelastic demand

 When the price of Good C increased from $5 to $6, the quantity consumers purchased decreased
from 1,000 to 600. The revenue decreased.

Elastic demand

 When the price of Good D increased from $2 to $4, the quantity consumers purchased decreased
from 1,200 to 700. The revenue increased.

Inelastic demand

 If price goes up and total revenue goes up. If price goes down and total revenue goes down

Inelastic demand

 If price goes up and total revenue goes down. If price goes down and total revenue goes up

Elastic demand

 A popular late night show host discusses the health benefits of not smoking and has several
celebrities promote this idea. This has convinced people to quit smoking. How will this affect the
market for cigarettes?

Decrease in demand due to a change in consumer tastes and preferences

Indicate change in supply/demand and why

 The price of computer chips decreases significantly, enabling manufactures of hard drives to
produce more hard drives. How will this affect the market for hard drives?

Increase in supply due to a change in input prices

 Swimming pool service providers can service more pools this year than last because of an advanced
sweeper that automatically adjusts chemicals in the water while sweeping the pool. How will this
affect the market for pool-cleaning services?

Increase in supply due to a change in technology

 A news report recently announced that baby boomers planned to sell their homes in the suburbs
and buy condos in the city sometime in the next three years. How will this affect the demand for
condos in the city?

Increase in demand due to a change in numbers of buyers in the market

Increase in demand due to change of prices of related goods

The price of movie tickets has increased significantly. How will this affect the market for DVD rentals?

Increase in supply due to a change in taxes or subsidies

Indicate change in supply/demand and why

To encourage energy conservation, the government will give companies a $10 credit on each residential
solar panel that they produce. Companies can deduct the credit from their taxes. How will this affect the
market for solar panels?

Demand curve

Graph showing the quantity demanded at each and every price at a given time

Marginal utility

The extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product

Demand

The desire, ability and willingness to buy a product

Diminishing marginal utility

The decrease in satisfaction or usefulness received from each additional unit of a product

Downward sloping

The demand curve is always?

Diminishing marginal utility

Buying only one drink instead of two drinks at lunch time describes what concept?

It shows that there is an inverse relationship between the price of an item and the quantity demanded

Which of the following statements describes the demand curve?

Only the market demand curve shows demand for everyone in the market

What decreasing the price of the product

Which of the following would cause a change in the quantity demanded for a product?

The curve shifts right

How does the demand curve show an increase in demand?

An increase in the price of a good usually leads to a decrease in the demand for its complement

How does the change in the price of a good affect its complement?

Butter and margarine

Which of the following is an example of substitutes?

The market demand curve to shift

A change in the number of consumers can cause?

Elastic
Describes demand when a given change in price causes a relatively larger change in the quantity
demanded

Unit elastic

Describes demand when a given change in price causes a proportional change in the quantity demanded

Inelastic

Describes demand when a given change in price causes a relatively smaller change in the quantity
demanded

Multiplying the price of a product by the quantity demanded

Total expenditures are determined by?

Inverse

The relationship between the change in price and total expenditures for an elastic demand curve is ?

Inelastic

If a consumer cannot postpone the purchase of a product, demand tends to be ?

Inelastic

A company decreases the price of a gallon of milk by 10 percent and the company’s revenue falls, what
term describes the demand for milk?

Purchasing fresh vegetables in the summer

Which of the following illustrates elastic demand?

Supply

The amount of a product that could be bought at all possible prices that could prevail in the market

Quantity supplied
Amount that producers bring to the market at any given price

Supply curve

A graph showing the various quantities supplied at each and every price that might prevail in the market

Subsidy

A government payment to an individual, business or other group to encourage or protect a certain type
of economic activity

The quantity supplied varies directly with its price

The law of supply states that?

A decrease in the cost of inputs

Which of the following can cause an increase in supply?

Ice cream cones

Which product is likely to have the most elastic supply curve?

Upward sloping

The supply curve is?

Shift to the left

Increased government regulations can cause the supply curve to ?

Fixed costs

Cost that a business incurs even if there is little or no activity

Total costs

Sum of fixed and variable costs

Total revenue

The number of units sold multiplied by the average price per unit

Variable costs

Cost that changes when the business’s rate of operation or output changes

Marginal analysis

Cost benefit decision making that compares the extra benefits to the extra costs of an action is called?

Operate longer hours than a firm whose fixed costs are small relative to variable costs

If a business’s fixed costs are large relative to its variable costs, it is likely to?

Equal to marginal revenue

Profit is maximized when marginal cost is ?

Marginal cost

The extra cost incurred when one additional unit of a product is produced

The long run

The period of production that allows producers to change the amounts of all inputs is ?

The short run

The period of production that allows producers to change only the amount of the variable input is ?

Output decreases

When the number of workers hired is so great that workers begin to get in each other’s way…?

Increasing returns, diminishing returns and negative returns

In what order do the three stages of production occur?

The way marginal product changes as variable inputs are added

The stages of production are based on ?

-executive salaries

-interest charges on bonds

-depreciation

-rent

-state/local property taxes

Give examples of fixed costs

-electricity

-wage earning employees (labor)

-raw materials/capital goods

-shipping

Give examples of variable costs the main difference between the individual demand curve and the
market demand curve?

Change in quantity demanded

Illustrated by movement along the demand curve

Complements

Products that increase the use of other products

Law of Demand

The demand for an economic product varies inversely with its price

Substitutes
Products that can be used in place of other products

Decreasing the price of the product

Which of the following would cause a change in the quantity demanded for a product?

The curve shifts right

How does the demand curve show an increase in demand?

An increase in the price of a good usually leads to a decrease in the demand for its complement

How does the change in the price of a good affect its complement?

Butter and margarine

Which of the following is an example of substitutes?

The market demand curve to shift

A change in the number of consumers can cause?

Elastic

Describes demand when a given change in price causes a relatively larger change in the quantity
demanded

Unit elastic

Describes demand when a given change in price causes a proportional change in the quantity demanded

Inelastic

Describes demand when a given change in price causes a relatively smaller change in the quantity
demanded

Multiplying the price of a product by the quantity demanded

Total expenditures are determined by?

Inverse

The relationship between the change in price and total expenditures for an elastic demand curve is ?

Inelastic

If a consumer cannot postpone the purchase of a product, demand tends to be ?

Inelastic

A company decreases the price of a gallon of milk by 10 percent and the company’s revenue falls, what
term describes the demand for milk?

Purchasing fresh vegetables in the summer

Which of the following illustrates elastic demand?

Supply

The amount of a product that could be bought at all possible prices that could prevail in the market

Quantity supplied

Amount that producers bring to the market at any given price

Supply curve

A graph showing the various quantities supplied at each and every price that might prevail in the market

Subsidy

A government payment to an individual, business or other group to encourage or protect a certain type
of economic activity

The quantity supplied varies directly with its price

The law of supply states that?

A decrease in the cost of inputs

Which of the following can cause an increase in supply?

Ice cream cones

Which product is likely to have the most elastic supply curve?

Upward sloping

The supply curve is?

Shift to the left

Increased government regulations can cause the supply curve to ?

Fixed costs

Cost that a business incurs even if there is little or no activity

Total costs

Sum of fixed and variable costs

Total revenue

The number of units sold multiplied by the average price per unit

Variable costs

Cost that changes when the business’s rate of operation or output changes

Marginal analysis

Cost benefit decision making that compares the extra benefits to the extra costs of an action is called?
Operate longer hours than a firm whose fixed costs are small relative to variable costs

If a business’s fixed costs are large relative to its variable costs, it is likely to?

Equal to marginal revenue

Profit is maximized when marginal cost is ?

Marginal cost

The extra cost incurred when one additional unit of a product is produced

The long run

The period of production that allows producers to change the amounts of all inputs is ?

The short run

The period of production that allows producers to change only the amount of the variable input is ?

Output decreases

When the number of workers hired is so great that workers begin to get in each other’s way…?

Increasing l

-electricity

--wage earning employees (labor)

-raw materials/capital goods

--shipping

Give examples of variable costs