Week 4

• Which side determines the behaviour of sellers/producers + investigates the determinant?

  supply
• What is the key determinant in neo-classical economics?

  price
• What is Quantity supplied?


  the amount of good that sellers are willing and able to sell at different prices
• What is Law of Supply?


  the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
• Finish the sentence: "price is less = producing ..."

  less
• What is Supply?


  whole relationship between the price of a good and the corresponding quantity supplied of that good
• What is Quantity Supplied?


  specific quantity for a particular price
• "In DC we know ... points."

  both
• "In SC we know only one point - difficult to find the other one."

  True
• "Equation for supply is as important as it is for demand."

  False
• "Individual Market = Supply Market"

  True
• What is Market Supply?


  the sum of the supplies of all sellers
• What is the shift's and movement's factor?

  price
• What is the economic argument for a Movement along a given curve?

  profit maximising motive of firms
• How do you divide a Shift of the Demand Curve (if prices the related good change)?

  substitutes in production, complements in production
• Complement is production is also known as?

  joint supply
• What is Substitutes in production?

  goods that can be produced by using the same resources
• What is the equation for Substitutes in production?

  P falls -> QS decreases (movement) + og's supply good increases (shift to the right)
• What is the most significant difference between a substitute and complement in production?

  in substitutes you can change strategy
• Give me examples of Substitutes in production

  butter and cheese, gasoline and Diesel, corn and soybean, BMW and VW
• What is Complements in production?

  goods that must be produced together
• What is the equation of Complements in production?

  P falls -> QS decreases (movement) + og's supply good decreases (shift to the left)
• Give me examples of Complements in production

  latte and milk, honey and beeswax, cocoa and chocolate, sheep meat and sheep wool
• "In the competitive market, both agents (supply + demand) should be there."

  True
• Finish the sentence: "People's demand is ..., my supply is ..."

  more, less
• "We don't expect the market to work independently."

  False
• What is Equilibrium?


  a state of rest (no force acting for change)
• Finish: "Market wants to be at ..."

  equilibrium
• Why does the market tend back to an E?

  LOD, LOS
• "Prices naturally do not adjust to both sides (demand and supply)."

  False
• "Prices move naturally to the E with the help of government intervention."

  False
• What is Disequilibrium?


  temporary phenomena, but can persist for a long time
• Give me an example of a Disequilibrium.

  house market
• What causes Disequilibrium?

  economic shock
• What do economists use to analyse economic shocks?

  comparative static analysis
• In case of 2 simultaneous shock?

  ambiguous answer
• What is the main difference between the D and S function?

  minus for demand, plus for supply
• Name me the comparative static analysis?


  Initial E, Shock + Adjustment process, New E, Comparison, Result