Chapter 3: Demand, Supply, And Market Equilibrium Flashcards
What is a Firm?
It is whem a person or a group of people create a product or products by transforming inputs (resources) into outputs (products or services) to a market.
What are Households?
They are the consuming units of an economy.
What is a Product or Output Market?
It is when the goods and services that are intended to be used by households are exchanged.
What are Input or Factor Markets?
The markets in which resources used to produce goods and services exchanged.
What are Labor Markets?
The input/factor market in which households supply work for wages to firms that demand labor.
What is a Capital Market?
The input/output factor market in which households supply their savings for interest or for claims to future profits, to firms that demand funds to buy capital goods.
What are the 3 ways that Households supply resources to a firm?
- Labor Market
- Capital Market
- Land Market
What are the 3 Factors of Production?
- Land
- Labour
- Capital
What is The Law of Demand?
This negative relationship between price and quantity demanded.
What is Quantity Demanded?
It is the amount (# of units) of a product that a household would buy in a given period.
What is Ceteris Paribus?
It means “all else equal.”
What is a Demand Schedule?
It shows how much of a product a person or household is willing to purchase per time period (each week or month) at different prices.
What are Normal goods?
Goods for which demand goes down when income decreases and goods for which demand goes up when income increases.
What are Inferior Goods?
Goods for which demand tends to fall when income rises.
What are the Determinants of Household Demand?
- Income and Wealth
- Substitutes
- Tastes and Preferences
- Expectations
