chap 3 Flashcards
Profit = ?
Sales-Costs
Factor Markets?
any place where factors of production like land, labor, and capital are exchanged
Product Markets
any place where finished goods and services (product( are sold
- think grocery store or something online where you buy stuff
Opportunity Costs
most desired goods or services that are forgoe in order to obtain something else
What is a market?
simply refers to a place or situation where an exconomic exchange occurs (buyer and seller interact)
what are the 4 factors of production?
land, labor, capital and entrepreneurship.
Supply?
ability and willingness to sell (produce) specific quanitites of a good
Demand?
ability and willingness to buy specific quantities of a good at alternative prices
- buy is on demand side
- a demand exists only if someone is willing and able to pay for the good
Demand Schedule?
a table showing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period
- demand schedule tells us what the consuer is willing and able to buy not necessarily why
Demand Curve
a convienent summary of buying intentions
- amount we buy of a good depends on its price
Law of Demand?
as the price of a goods falls, people purchase more of it
What are the 5 determinants of market demand?
tastes, income, other goods, expectations, and number of buyers
What is TASTE determinant of market demand?
(desire for this and other goods)
What is the INCOME determinant of market demand?
income (of the consumer)
What is the OTHER GOODS determinant of market demand?
other goods (their avaliability and price)
What is the EXPECTATIONS determinant of market demand?
expectations (for income, prices, tastes)
What is the NUMBER OF BUYERS determinant of market demand?
how many people buy it
complement good?
what happens to one good can cause change in demand of other good
- if you have milk with cereal and its price triples demand for cereal goe down - two goods that work together likes this is called complimentary good
Substitute good?
price of cerel goes up, so demand for subsitite good goes up
- price of tea goes up, the demand for coffee goes up
Ceteris Paribus?
assumption of nothing else changing
What do demand curves show us?
how changes in market prices alter consumer behavior
Shift in demand?
change in the quanitity demand at any given price
- entire demand curve shifts to the right when income goes up
Explain movement vs shifts on a graph
movements along ademand curve are a response to price changes for that good
- shifts of the demand curve occur when the determinants of demand change
- when tasts, income, other goods, or expectations are altered, the basic relationship between price and quantity demand is changed (shfits)
changes in quantity demanded
movements along a given demand curve in response to price changes of that good
changes in demand
shifts of the demand curve due to changes in tastes, income, other goods, or expectations
market demand
total quanitites of a goods or service people are willing and able to buy at alternative prices in a given time period
market supply?
total quanitites of a good that sellers are willing and able to sell at alternative prices in a given time period, ceteris paribus
what are the 6 determinants of market supply?
- technology
- factor costs
- other goods
- taxes and subsidies
- expectations
- number of sellers
Law of supply?
quanitity of a good supplied in a given time period increases as its price increases, ceteri paribus
market supply is a what?
expression of seller’s intentions - an offer to sell- not a statement of actual sales
changes in quantity supplied?
movements along a given supply curve
changes in supply?
shifts of the supply curve
explain difference between change in supply and quantity supplied?
changes in quanitity supplied can be tracked along the supply curve
- change in supply are illustrated by shifts of the supply curve
equilibrium price?
price at which the wuanitity of a good demanded in a given tie period equals the quantity supplied
market mechanism?
use of market prices and sales to signal desired outputs (or resource allocations)
Price floor?
minimum price for their services
market surplus
amount by which the wuantity supplied exceeds the quantity demanded at a iven price
market shortage
an excess quantity demanded over quanitity supplied
when will there be a market shortage?
whenever the market price is set above or below the euqilibirum proce, either a market surplus or a market shortage will occur
when will there be a market surplus?
when a market surplus, sellers will compete for customers by reducing prices
