Chapter 4/5 - Supply & Demand Flashcards
What are markets?
anyplace where buyers and sellers meet to exchange goods and services
What is demand?
combination of quantities that someone would be willing and able to buy over a range of possible prices at a given moment (a consumers willingness and ability to consume a given good).
Holding that all factors remain constant what is true about demand?
an increase in the price of a good or service will generally decrease quantity demanded.
What is the Law of Demand?
More will be demanded at lower prices and less at higher prices.
What are the 5 factors that influence the demand of goods?
- Tastes and preferences of the consumer (fashions in clothes)
- Income of people.
- Change in prices of related products
- Advertisement expenditures: ads greatly influence consumers.
- The number of consumers in the market: the greater the number the higher the demand.
What is supply?
the amount of a product a producer or seller would be willing to offer for sale at all possible price in a market at a given point of time. (the quantity or amount needed or available).
What is the law of supply?
the principal that more will be offered for sale at higher prices than at lower prices.
What are the 5 factors that influence the supply of goods?
- Price (if price of product increases, supply increases)
- Cost of production : higher = lower supply
- Natural conditions: drought = lower supply
- Technology: better tech = higher supply
- Government policies: higher taxes = lower supply
What is the key to marketing?
voluntary exchange
What is elasticity?
the ability to change or adapt
What is the elasticity of supply?
the responsiveness of quantity supplied to a change in price.
What are the two major types of supply elasticity?
- Elastic supply: a slight change in price will lead to a drastic change in demand/quantity
- wants/luxuries- caribbean cruise - Inelastic supply: a change in price will have little to no effect on demand quantity.
- needs/necessities
What is supply and demand?
the price of a good or service is determined by its supply and demand. Increase in demand = increase in price. Increase in supply = decrease in price. in the long run, the market reaches an equilibrium price where supply = demands.
What is incentive?
something that motivates.
What is subsidy?
a government payment to encourage or protect a certain economic activity. (food, gas, milk industries, etc.) Best interest of the public.
What are fixed costs?
costs of production that do not change when output changes.
What are variable costs?
production costs that vary as output changes; sometimes called (overhead)
What is overhead?
a broad category of variable costs that include interests, rent, taxes, and executive salaries.
What is total cost?
the sum of variable and fixed costs - all cases
What is marginal cost?
extra cost of producing one additional unit of production
What is average revenue?
average price that every unit of output sells for
What is total revenue?
the total amount earned from sale of all products
What is marginal revenue?
Extra revenue from the sale of one additional unit of output.
What is the break even point?
production level where total cost = total revenue
