Macro Economics: Questions And Answers

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_______
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