chapter 3 Flashcards

1
Q

market

A
  • group of buyers and sellers of a particular good
  • buyers: demand for product (consume)
  • sellers: supply product
  • can take many forms
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2
Q

forces at work in markets

A
  • supply and demand determine equilibrium price

who will produce (consume) what and how much (equilibrium quantity)

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3
Q

competitive market assumptions

A
  • many buyers and sellers
  • uniform good
  • perfect information
  • transactions occur easily
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4
Q

demand curve

A
  • negative relationship between price and quantity demanded
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5
Q

quantity demanded

A

amount of a good buyers are willing and able to purchase at a given price

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6
Q

movement along the demand curve

A
  • change in price

- lower price means a desire can be satisfied more cheaply

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7
Q

shift in demand curve

A
  • change in variable other than price
  • consumer’s tastes
  • consumer’s income
  • price of other (related) goods
  • consumer’s expectations
  • population
  • significant changes in weather
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8
Q

supply curve

A
  • positive relationship between price and quantity supplied (sold)
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9
Q

quantity supplied

A

amount of a good that sellers are willing and able to sell

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10
Q

movement along the supply curve

A
  • change in price

- as price increases, the quantity that can be supplied increases

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11
Q

shift in supply curve

A
  • change in a variable that isnt price
  • input prices (ages, price of new raw materials)
  • technology
  • government taxes/subsidies
  • prices of other products
  • significant changes in weather
  • number of suppliers
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12
Q

equilibrium

A
  • when the market price has reqched the level at which quantity supplied equals quantity demanded
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13
Q

normal goods

A

increase in income will result in an increase in demand

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14
Q

inferior good

A

increase in income will result in a decrease in demand

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15
Q

complement goods

A

2 goods for which an increase in the price of one leads to a decrease in the demand of the other

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16
Q

substitute goods

A

2 goods for which an increase in the price of one leads to an increase in the demand for the other