ECO 211 Chapter Notes - Chapter 3: Demand Curve, Reservation Price, Ceteris Paribus

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ECO 211 Full Course Notes

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If we predict a price will fall, we mean its price will fall relative to the average price of other goods and services. Relative price is usually calculated by dividing the price of a good in question by a price index. The most commonly used price index is the cpi (consumer price index). The cpi represents the average price of consumer goods in a particular month or year. The quantity demanded of a good or service is the amount that consumers plan to (or are willing to) buy in a given period of time at a particular (relative) price. Quantity demanded is measured as an amount per unit time: pizzas per day, pizzas per week, or pizzas per year. Other things remaining the same, the higher the price of a good, the smaller is the quantity demanded. The phrase other things being equal is sometimes abbreviated with the latin phrase ceteris paribus (cet. par.

Related Questions

48) Goods X and Y are substitutes for consumers and substitutes in production. The price of a resource used to produce good X falls. The equilibrium quantity of good Y will and the equilibrium price of good Y will A) remain the same; rise B) decrease; rise or fall depending on relative shifts of the demand and supply curves C) decrease; remain the same D) remain the same; fall E) increase, decrease, or remain the same depending on relative shifts of the demand and supply curves; fall

11.The concept of total surplus is a useful but imperfect measure of:

A. wellbeing

B. comparative advantage

C. market power

D. price elasticity of demand

12.Assume that burgers and pizzas are substitute goods in consumption only. When the burger price increases we will see which of the following changes in the pizza market?

A. An increase in demand and an increase in supply

B. An increase in demand and an increase in the quantity supplied

C. An increase in the quantity demanded and an increase in supply

D. An increase in the quantity demanded and no change to the quantity supplied

13.If the current price in a competitive market is $10 and the minimum of the the average total cost curve for a representative firm is $12, what is likely to occur to the market supply curve and the market price?

A. Supply will decrease and the price will rise

B. Supply will decrease and the price will fall

C. Supply will increase and the price will rise

D. Supply will increase and the price will fall