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Economics > Chapter 3: Where Prices comes form: the Interaction of Supply and Demand > Flashcards

Chapter 3: Where Prices comes form: the Interaction of Supply and Demand Flashcards

1
Q

Demand Schedule

A

A table that shows relationships between the price of a product and the quantity of the product demanded

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2
Q

Quantity Demanded

A

The amount of goods and services that a consumer is willing and able to purchase at a given price

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3
Q

Demand Curve

A

A curve that shows the relationship between the price of a product and the quantity of the product demanded

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4
Q

Market Demand

A

The demand by all the consumers of a given good or service

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5
Q

Law of Demand

A

When holding everything else constant, when the price of a product falls the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease

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6
Q

Substitution Effect

A

The change in the quantity demanded of a good that results from a change in price making that good or less expensive relative to other goods, holding the effect of the price change on consumers’ purchasing power

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7
Q

Income Effect

A

The change in the quantity demanded of a good the results from the effect of a change in the good’s price on consumers’ purchasing power

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8
Q

Ceteris Paribus Condition

A

Means all else equal
- requirement for analyzing two variable relationships

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9
Q

Variables that shift the market demands

A
  • Income
  • Prices of related goods
  • Tastes
  • Population and demographics
  • Expectations
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10
Q

Normal Good

A

When demand increases following a rise in income and decreases following a fall in income

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11
Q

Inferior Good

A

When demand decreases following a rise in income and increases following a fall in income

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12
Q

Substitutes

A

Goods and services that can be used for the same purpose

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13
Q

How does a increase in the price of a substitute effect the demand curve

A

Shift right
- Consumers buy less of the substitute and more of this good

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14
Q

How does an increase in the price of a complementary good effect the demand curve

A

Left shift
- Consumers buy less of the complementary good and less of this good too

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15
Q

How does an increase in the taste for the good effect the demand curve

A

Right shift
- Consumers are willing to buy a large quantity of the good at every price

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16
Q

How does an increase in the population effect the demand curve

A
  • Shift right
  • Additional consumers result in a greater demand at every price
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17
Q

How does an increase in the expected future price of the good effect the demand curve

A
  • Shift right
  • Consumers buy more of the good today to avoid the higher future price
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18
Q

Change in demand

A

Shift of the demand curve, change in one of the varibles

19
Q

Change in quantity demand

A

Movement along the demand curve as a result of change in the product’s price

20
Q

Quantity Supplied

A

The amount of a good or service that a firm is willing and able to supply at a given price

21
Q

Supply Schedule

A

A table that shows the relationship between the price of a product and the quantity of the product supplied

22
Q

Supply Curve

A

The relationship between the price of a product and the quantity of the product supplied

23
Q

Law of supply

A

Holding everything else constant, increases in price causes increases in the quantity supplied and decreases in price result in decrease in the quantity supplied

24
Q

Variables effecting market supply curve

A
  • Price of inputs
  • Technological change
  • Prices of substitutes in production
  • Number of firms in the market
  • Expected future prices
25
Q

Technological change

A

A positive or negative change in the ability of a firm to produce a given level of output from a given quantity of inputs

26
Q

How does an increase in the price of an input effect the supply curve

A

Left shift
- The cost of producing the good rises

27
Q

How does an increase in the productivity effect the supply curve

A

Right shift
- The cost of producing the good falls

28
Q

How does an increase in the price of a substitute in production effect the supply curve

A

Left shift
- More of the substitute is produced, and less of the good is produced

29
Q

How does an increase in the number of firms in the market effect the supply curve

A

Right shift
- Additional firms result in a greater quantity supplied at every price

30
Q

How does an increase in the expected future price of the product effect the supply curve

A

Left Shift
- Less of the good will be offered for sale today as firms wait to take advantage of the higher price expected in the future

31
Q

Change in supply

A

A shift in the supply curve, occurs when there is a change in one of the varibles

32
Q

Change in quantity supplied

A

a movement along the supply curve as a result of a change in the products price

33
Q

Market Equilibrium

A

When the quantity demanded equals the quantity supplied

34
Q

Competitive market equilibrium

A

A market equilibrium with many buyers and many sellers

35
Q

Surplus

A

A situation in which the quantity supplied is greater than the quantity demanded

36
Q

Shortage

A

When the quantity supplied is less than the quantity demanded

37
Q

How does a right shift in the supply curve change price and quantity

A

Q increases
P decreases

38
Q

How does a left shift in the supply curve change price and quantity

A

Q decreases
P increases

39
Q

How does a right shift in the demand curve change price and quantity

A

Q increases
P Increases

40
Q

How does a left shift in the demand curve change price and quantity

A

Q Decreases
P Decreases

41
Q

How does a right shift in the supply and demand curve change price and quantity

A

Q increases
P increases or decreases

42
Q

How does a left shift in the supply and demand curve change price and quantity

A

Q decreases
P increases or decreases

43
Q

How does a right shift in the supply curve and a left shift in the demand curve change price and quantity

A

Q increases or decreases
P decreases

44
Q

How does a left shift in the supply curve and a right shift in the demand curve change price and quantity

A

Q increases or decreases
P increases

Economics (8 decks)

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