Chapter 4 Flashcards
What is a market?
The interactions between buyers and sellers
What are property rights?
Legally enforceable guarantees of ownership of physical, financial, and intellectual property
What is shortage?
When quantity demanded exceeds quantity supplied
What is surplus?
When quantity supplied exceeds quantity demanded
What are the pressures shortages create?
Pressures for prices to rise
What are the pressures surplus’s create?
Pressures for prices to fall
What is equilibrium price?
The price where quantity demanded and quantity supplied are equalized and the forces of cooperation and competition are balanced.
What are the effects of an increase in demand?
A rise in equilibrium price and an increase in quantity supplied
What are the effects of a decrease in demand?
A fall in equilibrium price and a decrease in quantity supplied
What are the effects of an increase in supply?
A fall in equilibrium price and a increase in quantity demanded
What are the effects of a decrease in supply?
A rise in equilibrium price and a decrease in quantity demanded
What are comparative statics?
When two equilibrium outcomes are compared to isolate the effect of changing one factor at a time
What is consumer surplus?
The difference between the amount a consumer is willing to pay and the price they actually paid
What is producer surplus?
The difference between how much a producer is willing to accept and the amount they actually received
What is total surplus?
The sum of consumer surplus and producer surplus
