Commerce - T3 Flashcards
What is economics?
The study of scarcity
What is scarcity
the study on how people and groups use their limited means to obtain those things people need and want
What are needs
What you need in order to survive
What are wants
Things you desire to have but don’t need to survive
What are your limited means
Time - only 24 hours in a day
Skills - no one has unlimited skills
Money - no one has unlimited money
What does every decision create
Opportunity cost
What is opportunity cost
the next best alternative when a choice is made
eg a person can either buy a shirt or pants. If she buys the shirt the pants are her opportunity cost
What is a choice
making a selection from different alternatives
What are values
The principles and beliefs upon how we make our decisions
How do you describe a change in the demand curve
When the price of ____ (product) falls/increases from $_ to $_, quantity demand will increase/decrease from __ to __ of (product)
What is demand
the quantity of a good or service that a consumer is willing and able to buy at a range of prices
What is the law of demand
as a price of a good increases, the quantity demanded will decrease (vise versa) assuming ceteris paribus
When the price goes down the quantity demanded goes up
When the price goes up the quantity demanded goes down
What is ceteris paribus
A Latin term that means all other factors remain the same/are held constant
The amount a consumer buys at each price is called…
quantity demanded
If the price changes then quantity demanded will also change
What is a demand schedule
shows the relationship between the price of a good and a quantity demanded of that good
What is changes in demand
If a factor other than price changes (non-price factors) then the amount the consumer is willing and able to buy at each price may change. This means a whole new demand schedule and the whole demand curve shifts
What are non price factors affecting demand
income
tastes and preferences
change in the price of a substitute good
change in the price of a complimentary good
What is a substitute good
one that can be used instead of the original good eg Pepsi and Coke
if the price of a substitute changes, this may make a existing good more or less attractive to the consumer
What is a complimentary good
one that is traditionally used with the original good eg hot chips and ketchup
If the price of a complimentary good changes, this may change the demand for the existing good
What is supply
the amount of a good or service that a producer is willing and able to sell at various prices at a certain time.
What is the law of supply
as the price of a good or service increases, the quantity supplied will increase, vice versa, assuming ceteris paribus
What is a supply curve
When a change in price will cause a movement along the curve
How to describe a change in the supply curve
If a price decreases/increases from $_ to $_ the quantity supplied will decrease/increase from _ to _. Ceteris paribus
What is changes in supply
If factors other than price change occur then there is a change in supply and a shift of the supply curve
What are the causes of an increase in supply
decrease in costs of production
decrease in an indirect tax (sales tax, GST)
a subsidy is given to producers (payment to firms to reduce costs)
a tax on imports (tariff) is removed
What is the market
a place or situation where buyers and sellers exchange money for goods and services.
they may be local or international, have few buyers or many, be in a shop or operate online
What is market demand
the total quantity demanded by all consumers willing and able to buy the good or service. It is the horizontal sum of all individual demand curves at each price
What is market supply
the total quantity supplied by all producers of the product. It id the horizontal sum of all individual firms supply curves at each price
How are prices determined in the market
by the interaction of buyers and sellers in the market. The price will be set at market equilibrium
What is market equilibrium
where the quantity demanded for a product is equal to the quantity supplied of the product (Qd = Qs) We call this equilibrium quantity (We) and equilibrium price (Pe)
What is disequilibrium
where the market is out of balance
