Chapter 3 Terms Flashcards

1
Q

Product Market

Market=where things are sold

A

Any place where finished goods and services (products) are bought and sold.

  • grocery store, online shopping
  • buying something
  • finished product in stores (picnic table)
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2
Q

Opportunity Cost

A

The most desired goods or services that are forgone in order to obtain something else.

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3
Q

Supply

A

The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus.

-the seller

-we supply resources when we look for a job
(Offer labor for income)

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4
Q

Demand

A

The ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus.

  • the buyer
  • demand good when we shop for groceries
  • demand only exists if someone is willing and able to pay for the good
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5
Q

Demand Schedule

A

A table showing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus.

-what the consumer is willing and able to buy
(Will buy more, typically, if lower price)

-doesn’t tell why a consumer is willing to pay a
specific price

-“demand” is an expression of consumer buying intentions, willingness to buy, not a statement of actual purchase

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6
Q

Demand Curve

A

A curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus.

  • graphical illustration of demand schedule
  • visually shows how much someone will buy at a certain price
  • “demand” emphasizes: the amount we buy of a good depends on its price
  • price falls = more purchase of it
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7
Q

Law of Demand

Will I buy more Cheetos if they are $5 or $1?

A

The quantity of a good demanded in a given time period increases as its price falls, ceteris paribus.

  • price falls = people buy more of it
  • inverse relationship between price and quantity
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8
Q

Ceteris Paribus

A

The assumption of nothing else changing.

-demand curves show us how changes in market prices alter consumer behavior

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9
Q

Shift In Demand

A

A change in the quantity demanded at any (every) given price.

  • determinants of demand can and do change
  • only valid as long as everything remains the same
  • when determinants change, there is a shift
  • curve shifts right when income goes up

Increase in tastes also shifts demand curve to the right

-changes in demand: shifts of the demand curve because of changes in tastes, income, other goods, or expectations

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10
Q

Market Demand

(Market=people)

(Demand=what they like)

A

The total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands.

  • all the individual demand curves combined into one
  • combined willingness to buy something

(Collective market demand)

(Sum of our individual demands)

-determined by the number of buyers and what their tastes are, incomes, other goods, and expectations

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11
Q

Market Supply

A

The total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period, ceteris paribus.

  • how much people have to actually sell
  • how much people are willing to sell
  • depends on the behavior of all the individuals selling the good or service that is wanted by consumers
  • supply!
  • constructed from supply decisions of individual sellers
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12
Q

Law of Supply

A

The quantity of a good supplied in a given time period increases as its price increases, ceteris paribus.

  • larger quantities will be offered for sale if the price is high
  • ceteris paribus: amount supplied increases at higher prices if the determinants of supply stay the same
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13
Q

Equilibrium Price

A

The price at which the quantity of a good demanded in a given time period equals the quantity supplied.

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14
Q

Market Mechanism

Invisible hand

A

The use of market prices and sales to signal desired outputs (or resource allocations)

Market: prices

Mechanism: machine, how much it needs to make

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15
Q

Price Floor

Minimum wage

A

Lower limit set for the price of a good.

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16
Q

Market Surplus

A

The amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply.

17
Q

Market Shortage

A

The amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand.

18
Q

Price Ceiling

A

An upper limit imposed on the price of a good.

19
Q

Factor Market

(Market=where things are sold)

(Factor=factor of production)

A

Any place where factors of production (e.g., land, labor, capital) are bought and sold.

  • factors of production are exchanged
  • can buy or sell land, labor, or capital that can be used to produce
  • when you look for a job, your making a factor of production because your labor is available to producers

(Producers will hire you, purchase your service in the factor market if you have the skills they need)

-spend money to buy lumber in order to produce picnic tables

20
Q

Why are there movements in the demand curve?

A

Movements are due to

price changes for that good

21
Q

When does a shift in the demand curve happen?

A

When the determinants of demand changes

Tastes, income, other goods, expectations change

22
Q

Changes in quantity demanded = what?

Shift or movement?

A

Movement along the demand curve because of price changes of goods

23
Q

Changes in demand = what?

Shift or movement?

A

Shifts of the demand curve due to changes in determinants of demand

Taste, income, other goods, expectations

24
Q

What are the determinants of market supply?

6

A
  • Technology
  • Factor costs
  • Other Goods
  • Taxes and Subsidies
  • Expectations
  • Number of sellers
25
The market supply curve is a summary of what?
Supply intentions of all producers - expression of sellers intentions, not a statement of actual sales - I am willing to sell my car for a million dollars but I won't actually sell it for that price
26
Changes in quantity supplied is (movements, or shifts) along a supply curve?
Movements
27
Changes in supply is a (movement, shift) of the supply curve?
Shift
28
Equilibrium price
Where demand and supply curves intercept and/or meet a place where they are equal
29
WHAT
What to produce Refers to mix of output society produces
30
HOW
How goods should be produced
31
FOR WHOM
Who gets the goods Invisible hand
32
Price ceilings have 3 predictable effects: they....
- Increase the quantity demanded - Decrease the quantity supplied - Create a market shortage
43
What are the Determinants of demand? | 5
-Tastes: Desire for this and other goods -Income: Money consumer has to spend -Other Goods: Goods availability and price -Expectations: What they expect income will remain, price they expect, and their tastes -Number of Buyers Large amount of demand can increase price