Ch 3: The Market at Work Flashcards
market economy
a limited to goverment-free market where buyers and sellers can trade goods and services p72
invisible hand
refers to adam smith’s observation that the market will produce goods that are highly valued by the consumers. p72
competitive market
too many buyers/sellers that they have low to no impact on price and goods produced p73
imperfect market
when one buyer/seller can control the market price p74
market power
a producers ability to control the demand and /or supply so they can control the price of produced good p74
monopoly
when one producer supplies a good for the entire market p75
quantity demanded
the quantity the buyers are willing to buy a good based on market price p76
law of demand
Price go up; quantity demand goes down
Price goes down; quantity demanded goes up
demand schedule
a table that shows the negative correlation of quantity demanded and the price of good
demand curve
a graph that shows the negative correlation of quantity demanded and the price of good
market demand
by adding all the buyers quantity demanded of a good you can get the market demand p77
purchasing power
Less money you have, less quantity you demand. p80
normal good
a good that has a positive correlation between the relationship of buyer’s income and shift of quantity demanded
inferior good
a good that is not a luxury of choice, but of need. Canlis vs wendys
complements
goods that work in tandem (together) p81
Price goes up, shift left demand for complementary goods
substitutes
goods that can be substituted by another good.
Price goes up, shift right demand for alternative good
quantity supplied
the quantity the producers are willing to supply of a good, based on the market price.
law of supply
Price go up; supplies go up
Price go down; supplies go down
supply schedule
a table that shows the positive correlation between market price of good and quantity supplied
supply curve
a graph that shows the relationship between the price in the supply schedule and the quantity supplied at those prices p85
market supply
by adding up all quantity supplied of a good, you get the market supply p87
inputs
components that help produce in the system of production. Ex) raw materials, worker, building
subsidy
when government aids in money for production of a good so supply of a good shift right and the price of said good goes down for more consumption
equilibrium price
price in which demand curve and supply curve intersect. Ideal price for the market
equilibrium quantity
the quantity supplied meets the quantity demanded
law of supply and demand
price will adjust so quantity supplied and quantity demanded meet equilibrium P95
shortage
(excess demand) when there is more demand than supplies of a good in the market. Price needs to go up
surplus
(excess supply) when there is more supply than demand of a good in the market. Price needs to go down.
equilibrium
when demand curve and supply curve intersect and are in balance
5 determinants (shifters) of demand
1: Taste and preference
2: Number of consumers
3: Price of related goods
4: Income
5: Future expectations
5 determinants (shifters) of supply
1: Price/ availability of inputs( resources)
2: Number of sellers
3: Technology
4: Taxes and subsidies (Gov action)
5: Expectation of future profits
