This is JEOPARDYThis is JEOPARDY

Supply and DemandSupply and Demand Mr. Booth/Alex TrebekMr. Booth/Alex Trebek

CategorieCategoriess100 200 300 400 500

100 200 300 400 500

100 200 300 400 500

100 200 300 400 500

100 200 300 400 500

100 200 300 400 500500

Def. of DemandDef. of Demand

Def. of SupplyDef. of Supply

Elastic or InelasticElastic or Inelastic

RandomRandom

What If?What If?

Review Review QuestionsQuestions

Final JeopardyFinal Jeopardy

QD would decrease from 10 to QD would decrease from 10 to 5. 5.

You have $50 and want to You have $50 and want to buy some CD’s. If prices of buy some CD’s. If prices of CD’s rose from $5 each to CD’s rose from $5 each to $10, how would your $10, how would your quantity demanded of CD’s quantity demanded of CD’s change?change?

What is Utility?What is Utility?

Benefit or satisfaction Benefit or satisfaction gained from using a gained from using a

good or servicegood or service

What is the Income What is the Income Effect?Effect?

You buy more if the price is You buy more if the price is lower and buy less if the price is lower and buy less if the price is

higherhigher

What are Substitutions or What are Substitutions or the Substitution Effect?the Substitution Effect?

When you react to a change When you react to a change in price and buy a similar in price and buy a similar

product Ex. Going to a movie product Ex. Going to a movie instead of renting a DVD instead of renting a DVD

from Blockbusterfrom Blockbuster

What are Inferior What are Inferior Goods?Goods?

Demand for these goods Demand for these goods fall as income rises. fall as income rises. Example: Discounted Example: Discounted

clothingclothing

When the use of a product increases the use of another

product. Example: Cereal and Milk

What are What are Complements?Complements?

The change in total The change in total product by adding more product by adding more

workersworkers

What is Marginal Product?What is Marginal Product?

Costs that depend on the Costs that depend on the level of output. Example: level of output. Example:

Wages for workersWages for workers

What are Variable What are Variable Costs?Costs?

Tax on items the Tax on items the government is government is interested in interested in

discouraging. Ex: Tax discouraging. Ex: Tax on Cigaretteson Cigarettes

What are Excise Taxes?What are Excise Taxes?

This controls businesses This controls businesses behavior. Ex. Government behavior. Ex. Government _____the prescription drug _____the prescription drug industry so people don’t industry so people don’t

die from a dangerous drugdie from a dangerous drug

What is Regulation?What is Regulation?

Example: Cost that a business must pay regardless of output.

Example: A business paying its lease or even utilities.

What are Fixed Costs?What are Fixed Costs?

A good with a lot of A good with a lot of substitutes.substitutes.

What is Elastic?What is Elastic?

Daily Daily DoubleDouble

“Don’t Choke!”

What is Elastic?What is Elastic?

A luxury item like a Ferrari

InsulinInsulin

What is Inelastic?What is Inelastic?

Sweet rims for an EscaladeSweet rims for an Escalade

What is Elastic?What is Elastic?

Ice CreamIce Cream

What is Elastic (many What is Elastic (many substitutes if prices goes substitutes if prices goes

up)?up)?

A software company invest in A software company invest in a set of fast, new computers a set of fast, new computers that allow employees to test that allow employees to test

their new programs easily and their new programs easily and quickly. What factor is this quickly. What factor is this

and how will it affect supply?and how will it affect supply?

Want is Technology/Increase/Shift Want is Technology/Increase/Shift Right?Right?

A farmer is deciding how much tobacco A farmer is deciding how much tobacco and how much corn to grow on the farm. and how much corn to grow on the farm. Congress recently cut the subsidies that it Congress recently cut the subsidies that it pays farmers to raise tobacco. What factor pays farmers to raise tobacco. What factor is this and how will it affect supply of both is this and how will it affect supply of both

crops?crops?

A. Government Action/tobacco will decrease A. Government Action/tobacco will decrease in supply and supply of corn will increase in supply and supply of corn will increase

and move to the right.and move to the right.

Situation: Substitutes. Situation: Substitutes. The price goes up for a The price goes up for a movie. What happens movie. What happens

to the demand of to the demand of renting a DVD renting a DVD

(Substitute). It goes (Substitute). It goes __________

What is Up ?What is Up ?

A tool-making company hires several workers who got degrees from a technical school, where they learned manufacturing techniques. Which factor is this and how

will it affect supply?

A. What is productivity/A. What is productivity/

Supply will increase and shift the curve Supply will increase and shift the curve to the right?to the right?

Daily Daily DoubleDouble

“Don’t Choke!”

You own a company that makes You own a company that makes wire. The price of copper has wire. The price of copper has

recently gone up. What recently gone up. What characteristic is it and what characteristic is it and what

happens to supply?happens to supply?

A. A. Characteristic is input costs Characteristic is input costs and supply will decrease and and supply will decrease and

go to the left.go to the left.

Money made from Money made from producting an additional producting an additional

unit of output. unit of output.

What is Marginal Revenue?What is Marginal Revenue?

This law states that the marginal This law states that the marginal benefit of using each additional benefit of using each additional unit of a product during a given unit of a product during a given

period will declineperiod will decline

What the Law of What the Law of Diminishing Marginal Diminishing Marginal

Utility?Utility?

Goods that consumers demand more of Goods that consumers demand more of when their incomes risewhen their incomes rise

What are Normal What are Normal Goods?Goods?

When a worker focuses When a worker focuses on a particular aspect on a particular aspect

of productionof production

What is Specialization?What is Specialization?

A government payment that A government payment that partially covers the cost of an partially covers the cost of an economic activity. Example: economic activity. Example:

Government made payments to Government made payments to double the supply of ethanol double the supply of ethanol

(gasoline substitute)(gasoline substitute)

What is a Subsidy?What is a Subsidy?

A. Supply is above the A. Supply is above the equilibrium price = Surplusequilibrium price = Surplus

Supply is below the Supply is below the equilibrium price = Shortageequilibrium price = Shortage

How are surplus and shortage How are surplus and shortage related to equilibrium price?related to equilibrium price?

InelasticInelastic

When consumers have few When consumers have few choices, will the demand be choices, will the demand be

elastic or inelastic?elastic or inelastic?

A. They will buy the A. They will buy the substitute because it’s substitute because it’s

cheaper. cheaper.

If the price of a substitute drops, If the price of a substitute drops, will they buy the substitute or will they buy the substitute or

the original good?the original good?

A. An increase in demand for A. An increase in demand for coffee coffee

An increase in demand for one An increase in demand for one complement will have what complement will have what

effect on the other effect on the other complementary good? complementary good?

Example: An increase in demand Example: An increase in demand for sugar will have what effect for sugar will have what effect

on coffee?on coffee?

Does supply have an Does supply have an inverse or direct inverse or direct

relationship?relationship?

A. A direct relationship. If A. A direct relationship. If demand goes up, supply goes up demand goes up, supply goes up

because producers think they because producers think they can make more money with can make more money with

more product sold.more product sold.