Chapter 4 Terms Flashcards
1
Q
Demand
A
- The relationship between a good’s price and the amount that people are willing to buy
2
Q
Supply
A
- The relationship between a good’s price and the amount that producers are willing to provide for consumers
3
Q
Value in Use
A
- Value that is directly related to the benefits their owners receive through their use
4
Q
Value in Exchange
A
- What a particular good is worth in exchange for some other good
5
Q
Price
A
- The amount of money that a buyer pays the seller for a particular item
6
Q
Market Prices
A
- Those prices at which goods can be sold on an open market with many potential sellers and buyers
7
Q
Diminishing Marginal Utility
A
- As one’s supply of a specific good or service increases, the satisfaction derived from each additional unit tends to decrease
8
Q
Marginal Utility
A
- The amount of satisfaction that results from a one unit increase of a product tends to become smaller with each additional unit
9
Q
Total Utility
A
- The total amount of satisfaction received from possessing a particular amount of a good
10
Q
Law of Demand
A
- One of the most important principles of economics
- Explains the inverse relationship between the price of a good and the amount that people choose to buy
- Other things remaining equal, as the price of a good increases, the quantity demanded decreases in a free market economy
11
Q
Income Effect
A
- When the price of a good falls, consumers tend to buy more of that good or of other items because they can do so without giving up anything
12
Q
Substitution Effect
A
- People tend to substitute less expensive goods for ones whose prices have risen
13
Q
Demand Schedule
A
- A list of numbers that compares price with quality demanded
14
Q
Demand Curve
A
- A graphic representation of the quantity of goods purchased at different prices
- Always slopes downward and to the right
15
Q
The Five Factors That Change Demand
A
- Tastes and Preferences
- Income
- Population
- Prices of Related Goods
- Consumer Expectations
16
Q
Normal Good
A
- A good whose demand is directly related to consumers’ incomes
17
Q
Inferior Goods
A
- Demand for these items decreases as consumers’ incomes increase, and vice versa
18
Q
Substitutes
A
- A good capable of being used in place of another
19
Q
Complements
A
- A good often used in conjunction with another
20
Q
Law of Supply
A
- States the direct relationship between the price of a good and the amount that suppliers will make available
- Other things remaining equal, as the price of a good increases, the quantity supplied also increases in a free market economy
21
Q
Supply Schedule
A
- A list of numbers that compares price with quantity supplied
22
Q
Supply Curve
A
- A graphic representation of the quantity of goods supplied at different prices
- Always slopes upward and to the right
23
Q
The Six Changes in Supply
A
- Technology
- Resource Prices
- Prices of Related Goods
- Number of Sellers
- Producer Expectations
- Government Taxes, Subsidies, and Regulations
24
Q
Subsidies
A
- Money
25
Equilibrium
- The point at which quantity demanded and quantity supplied are equal
26
Shortage
- The situation in which the quantity demanded exceeds the quantity supplied at a given price
27
Surplus
- If the quantity supplied of a good is greater than the quantity demanded at a given price
28
Elastic
- If prices go up, people will buy less
29
Price Elasticity of Demand
- The phenomenon that has to do with elastic
30
Inelastic
- If consumers will pay really high prices for a particular commodity because they feel there are no substitutes
31
Price Ceiling
- When governments place a limit on how high a producer may charge for his product
32
Price Floors
- Price levels set above the equilibrium prices
