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ECON!! > chapter three - supply, demand, and prices > Flashcards

chapter three - supply, demand, and prices Flashcards

1
Q

demand

A

an economic principle referring to a consumers desire to purchase goods and services and willingness to pay a price for a specific good or service
- what people want

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2
Q

the law of demand

A

a fundamental principle of economics that states that at a higher price consumers will demand a lower quantity of a good

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3
Q

substitution effect

A

consumers switching to cheaper products as prices increase

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4
Q

income effect

A
  • you spend less if you make less
  • a microeconomics term descriving how changes to consumers real income levels can affect their purchasing patterns
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5
Q

market demand schedule

A
  • a listing of how much of a good or service all consumers are willing to purchase at each price
  • this shows the demand of all people in a market who are willing and able o buy a good/service
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6
Q

reading demand curves

A
  • horizontally: the quantity buyers are willing and able to purchase at a given price
  • vertically: the maxiumum price that buyers are willing to pay for a given unit of oil
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7
Q

ceteris paribus

A

all other things being equal

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8
Q

non-price determinates of demand

A
  • income (normal and inferior goods)
  • consumer expectations
  • changes in demographics
  • changes in pop size
  • consumer taste and advertising
  • prices of related goods
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9
Q

prices of related goods

A
  • complements: 2 goods that are bought and used together
  • substitutes: goods that are used in place of one another
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10
Q

elasticity of demand

A
  • elastic: purchasing less after a small price increase
  • inelastic: purchasing the same amount, or slightly less, after a large price increase: gas - have to have it
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11
Q

calculating elastic

A
  • price range vary at every price level and can be highly elastic at one price and inelastic at anoter
  • values: demand for a good at a certain price is less than 1, it is inelastic; more than 1 is elastic
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12
Q

factors affecting elasticity

A
  • availability of substitutes
  • relative imporatance
  • neccessities vs. luxuries
  • change over time
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13
Q

elasticity and pricing

A

a measurement of the change in demand for a good or service in relation to a change in its price

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14
Q

law of supply

A
  • the microeconomic law that states that, all other factors being equal as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase and vice versa
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15
Q

supply curve

A

a graphic rep. of the corrlation between the cost of a good or service and the quality supplied for a given period

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16
Q

elasticity of supply and time

A

short run
long run

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17
Q

cost of production

A

the direct and indirect costs businesses face from manufacturing a product or providing a service

18
Q

labor and output

A

marginal product of labor
- increasing marginal returns
- diminishing marginal returns
- negative marginal returns

19
Q

production costs

A
  • fixed costs
  • variable costs
  • total costs
  • marginal cost
20
Q

fixed v variable

A
  • the cost associated w your business’ product that must be paid regardless of how much you sell
  • the cost directly related to the sales volume of your business
21
Q

Marginal and average total cost

A
  • if marginal cost is below avg. total cost, avg. total cost will decline toward marginal cost
  • if marginal cost is above avg. total cost, avg. total cost will increase
  • marginal cost intersects avg. total cost and avg. variable cost curves at their minimum points
22
Q

setting output

A
  • marginal revenue and marginal cost
  • response and price change
23
Q

marginal revenue

A

marginal revenue = change in total revenue/ change in quantity sold

24
Q

shutdown decision

A
  • a level of operations at which a company experiences no benefit for continuing operations and therefore decides to shut down temp. - or in some cases permanently
25
Q

changes in supply

A

-when the suppliers of a given good or service alter production or output

26
Q

input cost

A
  • effects of rising costs
  • technology
27
Q

govt. influences on supply

A

subsidies, excise taxes, regulation

28
Q

supply in the global economy

A
  • conditions in other countries
  • breaks in the supply chain
29
Q

other influences on supply

A
  • future expectations of prices
  • # of suppliers
30
Q

equilibrium

A

a state in which the supply and demand for a given goods or service are in balance

31
Q

disequilibrium

A
  • excess demand: shortage, actual market price is below the equlibrium price
  • excess supply: surplus, actual price is higher than equlibrium
32
Q

govt. intervention

A
  • price ceilings: max price for a good or services (rent control)
  • price floors: minimum price for a good or service ( minimum wage, agriculture price supports)
33
Q

what are the changes in market equalibrium

A
34
Q

changes in price

A

shifts in supply, finding new equalibrium (surplus)

35
Q

the role of prices

A
  • tools for distributing goods and resources
  • moves factors of production to producers
  • moves finished goods to buyers
36
Q

advantages

A
  • incentives
  • signals - signals in price lowering, the demand lowers
  • flexibility (supply shock, rationing
    -“free” nothing is free
37
Q

wide choices of goods

A
  • rationing and shortages
  • black market
38
Q

efficient resource allocation

A
  • attained when the cost of goods and services = marginal costs
  • aids in profit maximization
  • price and the marginal cost of production are identical in a market w perfect competition
39
Q

profit incentive

A
  • the diff. between a business’s total revenues and its total cost
  • the profit incentive is the desire that persuades entrepreneurs to establish new businesses or explain existing ones, improve products and cut costs of production
  • how to make more money
  • in a market economy, the profit incentive spurs on efficiency, growth and economic progress
40
Q

market problems

A
  • imperfect performance: making wrong choices
  • imperfect competition: fewer sells negative externalizes: not paid by producers but by consumers and society (pollution)

ECON!! (7 decks)

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