| Terms |
Definitions |
|
regulation
|
government intervention that affects the price, quantity, and quality of a good
|
|
Surplus
|
situation in which quantity supplied is greater than quantity demanded at the current price
|
|
demand
|
the quantities of a wall-defined commodity that consumers are willing and able to buy at each possible price during a given period of time, ceteris paribus
|
|
Equilibrium Price
|
Price @ Quantity Demanded
=
Price @ Quantity Supplied
|
|
Product price/Purchasing Power/Quantity Demanded relationship
|
As product prices increases, purchasing power decreases, and quantity demanded decreases.As product price decreases, purchasing power increases, and quantity demanded increases.
|
|
equilibrium
|
the point at which quantity demanded and quantity supplied are equal at a particular price
|
|
"supply side"
|
where sellers decide how much to produce or supply
|
|
Change in Supply
|
A change in the quantity that suppliers plan to sell when any influence on buying plans other than the price of the good changes
|
|
Demand curve
|
plots the info from the demand schedule to illustrate the relationship between P and QD -- always have negative slopes
|
|
market
|
the market for any good consists of all buyers or sellers of that good
|
|
effect of inflation
|
encourages suppliers to hold on to goods as long as possible (because cash loses its value rapidly)
|
|
Supply Schedule
|
Is a list of the quantities supplied at each different price when all other influences on sellin plans remain the same
|
|
Law of Supply
|
economic rule stating that price and quantity supplied move in the same direction
|
|
Complement
|
a good that is used together with some other good
|
|
Substitution Effect
|
The change in the quantity demanded of some product that results from a CHANGE IN PRICE, making the good MORE or LESS expensive relative to other goods that are substitutes.
|
|
Variables that Shifts the Market Supply Curve
|
prices of inputs
technological change
prices of substitutes in production
number of firms int he market
expected future prices
|
|
fixed cost
|
a cost that does not change, no matter how much of a good is produced (cost of building and equipping a business)
|
|
What is the
difference between change in demand and change in quantity demanded?
|
Change in demand-curve shifts
change in quantity demanded- movement in one point to another on the same curve
|
|
marginal product of labor
|
the change in output from hiring one more worker
|
|
Imperefectly Competative market
|
A market in which a single biyer or seller has the power to influence the price of the product
|
|
Increase in Income (good is normal)
|
shifts to the right
consumers spend more of their higher incomes on the good
|
|
Explain why market equilibrium can be stable or unstable?
|
Equilibrium might be stable or unstable because the market is constantly pulled towards a stable erquilibrium in w/c neither buyers or sellers can improve their positions by chaing either the price or quantity. Buyers want the lowest possible price and sellers want the highest possible price
|
|
equilibrium price and equilibrium quantity
|
the values of price and quantity for which quantity supplied and quantity demanded are equal
|
|
A shift in a demand curve is...
|
an increase or decrease in DEMAND itself.
|
|
How does a change in Supply affect the Demand & Supply Curve?
|
Change in Supply
=
Change in Quantity Demanded
=
A movement along the Demand Curve
|
|
How does an increase in demand affect the demand curve?
|
An increase in demand means the demand curve shifts rightward
|
|
Shortage
|
Quantity Demanded exceeds Quantity Supplied
Price is below the Equilibrium Price
Price rises
|
|
Aggregation
|
The process of combinging distinct thinks into a single whole
|
|
What do these mean:
Ed>1
Ed<1
Ed=1
Ed=∞
Ed=0
|
The item is:
elastic
inelastic
unit elastic
perfectly elastic
perfectly inelastic
|
|
stability
|
the state or quality of being stable.
|
|
substitutes
|
goods used in place of one another, demand rises and falls inversely (skis and snowboards)
|
|
Technology
|
the use of science to develop new products and new methods for producing and distributing goods and services
|
|
Supply curve
|
A graphical depiction of a supply scdual, a curve showing the quantiy of a good/service supplied at various prices withh all other variables held constant
|
|
Peole are Rational
|
economists assume that consumers and firms use all information as they act to achieve their goals
weight the benefits and costs of each action and they choose an action only if the benefits outweighs the cots
|
|
market supply curve
|
supply curve of individual firms added up
|
|
Equilibrium Quantity
|
The quantity that is bought and sold at the equilibrium price
|
|
Market economy
|
An economic system made up of smaller buliding blocks of individual markets for trading all the different goods and services used in a country.
|
|
Normal Good
|
A good for which the demand increases as income rises and decreases as income falls.
|
|
People Respnd to Economic Incentives
|
economists emphasize that consumers and firms consistently respond to economic incentives
|
|
price ceiling
|
a situation where the price is not allowed to rise above a certain level
|
|
demand schedule
|
a table that lists the quantity of a good that a person will purchase at each price in the market
|
|
Market price
|
The typical price at which a good or service sells.
|
|
Market Demand
|
The demand by all consumers of a given good or service.
|
|
seller's reservation price
|
the smallest dollar amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost
|
|
Substitute in Production
|
A good that can be produced in place of another good
|
|
What does it mean if
EA/B>0
EA/B<0
|
1. The goods are substitutes
2. The goods are complements
|
|
What are the main influences that change supply?
|
Prices of related goods
Prices of resources & other inputs
Expectations
Number of Sellers
Productivity
|
|
Inelastic demand (ID)
|
When a major change in the P of a g/s has minimal effect on QD -- there are g/s that are necessities and have no legitimate substitutes; eg, toilet paper/cigarettes
|
|
How does a decrease in the quantity demanded affect the demand curve?
|
A decrease in quantity demanded means a movement up along the demand curve
|
|
The price of a product and the quantity demanded have what type of relationship?
|
The price of a product and the quantity demanded have an inverse relationship.As the price of a product goes down, the quantity demanded for the product goes up.
|
