Chapter 3 Flashcards
8 different types of markets
goods market
services market
factors of production
money market
bond market
stock market
commodity market
foreign exchange market
competitive market
many buyers & sellers, one doesn’t influence price
money price vs relative price
money price- how much you pay for that good
relative price- ratio of one price to another price of the same good (also opportunity cost)
3 things need for demand
want it, be able to afford it, and have a definite plan to buy
Quantity Demanded (Qd)
- point on the demand curve at particular price
- Δ in price = Δ in quantity demanded = movement along the demand curve
law of demand & 2 reasons
higher the price = the smaller the Qd
substitution effect (cheaper sub that gives you more)
income effect (when goods prices rise “real income” falls)
demand equation
P = a - bQd
p- price
a-
increase vs decrease in demand and curve shift
increase = shift right
decrease = shift left
price of a substitute in consumption
price for Y increases, D for X increases
POSITIVE
price of a complement in consumption
price for Y increases, D for X decreases
INVERSE
consumer income (normal vs inferior good)
normal good- income increases, demand increases
POSITIVE
Inferior good- income increases, demand decreases
INVERSE
movement vs shift in demand curve
movement- change in Qd
shift- change in Demand
Quantity Supplied (Qs)
-point on supply curve at a particular price
-change in price = change in quantity suppled = movement along supply curve
law of supply and reasons
price increase = supply increase
price decrease = supply decrease
POSITIVE
Marginal cost increases
factors of production
rent, wages, interest, normal profit, all INVERSE
