Download Unit 3 Reviewsheet

Unit 3 (CH 4, 5.1, 6, 7.1): Supply and Demand and the Effects on the Market
Test Date___April 11th__________________
Unit 3 vocabulary:
Quiz on __March 10th_______________
Vocab Test Date___Apr 6th____________
1. Demand--combination of desire, ability, and willingness to buy a product
2. Law of demand--rule stating that more will be demanded at lower prices and less at higher prices; inverse relationship between
price and quantity demanded
3. Marginal utility--satisfaction or usefulness obtained from acquiring one more unit of a product
4. Elasticity--a measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an
independent variable such as price
5. Supply--amount of a product offered for sale at all possible prices in a market at a given point in time
6. Law of supply--principle that more will be offered for sale at high prices than at lower prices
7. Rationing--system of allocating goods and services without prices
8. Economic model--simplified version of a complex concept or behavior expressed in the form of a graph, figure, equation, or
diagram
9. Price—the monetary value of a product
10. Equilibrium price--price where quantity supplied equals quantity demanded
11. Pure competition--a theoretical market structure that requires three conditions: very large numbers of buyers and sellers,
identical products, and freedom of entry and exit
12. Industry--group of firms producing similar or identical products
13. Market structure--market classification according to number and size of firms, type of product, and type of competition; nature
and degree of competition among firms in the same industry
14. Monopolistic competition--market structure having all conditions of pure competition except for identical products; a form of
imperfect competition
15. Oligopoly--market structure in which a few large sellers dominate and have the ability to affect prices in the industry; form of
imperfect competition
16. Collusion—illegal agreement among producers to fix prices, limit output, divide markets, or agree to reduce competition
17. Monopoly--market structure characterized by a single producer; form of imperfect competition
18. Ordinance—a law made by a town or city government that controls the way a business can act or operate
19. Regulations-- a law made by the state or federal government that controls the way that a business can operate
20. Laissez-faire--philosophy that government should not interfere with business activity
Unit 3 Guiding Questions:
1. What is the relationship between the price of an item and the quantity demanded? (pg 102-104)
2. Why do economists think of demand as a “law”? (pg 104—105)
3. How does the principle of diminishing marginal utility explain the price we would be willing to pay for another unit of a good or service? (pg
105--106
4. What is the effect of a change in price on quantity demanded? (pg 108—109)
5. What factors, excluding price, affect demand? (pg 110—113)
6. How do we measure the three cases of demand elasticity? (pg 114—115)
7. How does the total expenditures test help determine demand elasticity? (pg 115—117)
8. What factors determine a product’s demand elasticity? (pg 117-119)
9. Why do supply and demand curves slope in opposite directions? (pg 128—131)
10. What might happen to make a producer decrease his or her supply of a product? (pg 131—134)
11. How does the production of a product affect the elasticity of supply? (pg 134-135)
12. How do prices help us make decisions? (pg 154-156)
13. Are prices the best way to allocate resources? (pg 156—158)
14. How do prices connect markets in an economy? (pg 158—159)
15. How does price affect a seller’s decision to produce a product? (pg 160—164)
16. How do changes in supply and demand affect prices? (pg 164—166)
17. What are the costs and benefits of economic policies aimed at creating equity and security? (pg 168—169)
18. Whom do price supports benefit and whom do they hurt? (pg 169-172)
19. Why do markets dominated by oligopolies result in higher prices or the consumers than would exist in perfect competition? (pg 186—188)
20. Why are some types of monopolies considered acceptable while others are not? (pg 188-189)