All chapter 4-5 Flashcards
The relationship between a good’s price and the amount that people are willing to buy
Demand
As the relationship between a good’s price and the amount that producers are willing to provide for consumers
Supply
Value that is directly related to the benefits their owners receive through their use
Value in use
What a particular good is worth in exchange for some other good
Value in exchange
The amount of money that a buyer pays the seller for a particular item
Price
Phenomenon that states that as one’s supply of a specific good or service increases, the satisfaction derived from each additional unit tends to decrease
Diminishing marginal utility
The amount of satisfaction that results from a one-unit increase of a product, tends to become smaller with each additional unit
Marginal utility
“Other things remain equal, as the price of a good increases, the quantity demanded decreases in a free market economy”
Law of demand
When the price of a good falls, consumers tend to buy more of that good or of other items because they can do so without giving up anything
Income effect
Indicates that people tend to substitute less expensive goods for ones whose prices have risen
Substitution effect
A list of numbers that compares price with quantity demanded
Demand schedule
A graphic representation of the quantity of good purchased at different prices
Demand curve
Five key factors that can shift the demand curve
1) Tastes and Preferences
2)Income
3)Population
4)Prices of Related Goods
5)Consumer Expectations
A good whose demand is directly related to consumers’ incomes is called…
Normal good
Demand for these items decreases as consumers’ incomes increase, and vice versa
Inferior goods
A good capable of being used in place of another
Substitutes
A good often used in conjunction with another
Complements
“Other things remaining equal, as the price of a good increases, the quantity supplied also increases in a free market economy”
Law of supply
A list of numbers that compares price with quantity supplied
Supply schedule
A graphic representation of the quantity of goods supplied at different prices
Supply curve
The entire supply curve represents…
The supply
Any single point along the supply curve represents the..
Quantity supplied
Six factors that made a change in supply
- Technology
- Resource prices
- Prices of related goods
- Number of sellers
- Producer expectation
- Government taxes, subsides, and regulations
When governments try to encourage production by giving money
Subsidies
The point at which quantity demanded and quantity supplied are equal
Equilibrium
The situation in which the quantity demanded exceeds the quantity supplied at a given price
Shortage
If the quantity supplied of a good is greater than the quantity demanded at a given price
Surplus
If prices go up, people will buy less
Elastic
Price elasticity of demand
If consumers will pay very high prices for a particular commodity because they feel there are no substitutes
Inelastic
When governments place a limit on how high a producer may charge for his product, we call it…
Price ceiling
Price levels set above the equilibrium prices
Price floors
Signs that are used by consumers and producers to determine how much of a good to buy or sell at a given price and time
Market signals
Goods that have a life expectancy of less than three years
Nondurable goods
Products that are expected to last at least three years
Durable goods
The part of an economy that is controlled by private individuals, businesses, and organizations.
Private sector
The part of economy which is controlled by national, state, and local governments
Public sector
Shadowy, underground systems
Black markets
The reason that a person is willing to trade certain goods wether they are tangible items, or other goods.
Profit motive
The diminishing of the value of goods that is caused by wear and time.
Depreciation
The excess of the total revenue paid by buyers for goods over the seller’s total expense of producing those goods
Profit
The value of the best alternative that is foregone when a different alternative is taken
Opportunity cost
The total value of a business minus any liabilities
Equity
