demand ad supply Flashcards
what are markets
a place were buyers and sellers connect in order to exchange goods and services
what is the factor market
where the factors of production are bought and sold
what is a commodities market
where the raw materials used to make goods and services are bought
whats a final market
where finished goods and services are produced
whats demand
the quantity of a product that consumers are willing to buy at a given price
whats effective demand
the willingness to buy backed by the ability to pay
what is a substitute good
a product that can be used instead of a different product
whats an inferior good
a good that demand drops when peoples incomes increase
whats a normal good
a good that experiances an increase in demand when peopls incomes rise
4 assumptions of economists
1.most consumers have limited income
2.most consumers have unlimited needs and wants
3.most consumers make rational decisions on what they spend their income on
4.there is a limit to how much of a product a consumer will buy
what is the law of diminishing margional duty
as each unit of a good is consumed the untility gained for each extra unit is decreased
3 factors that cause a shift in demand
1.price of substatute good
2.price of complimentary good= if there is a change in one there will be a change in the other
3.trends=as taste changes demand will too
why does demand go up if price goes down
-people will be able to afford the product
-people may now think that the product is worth the money
why does demand go down if price goes up
-people wont be able to afford the product
-people may think that the product is not worth the money
what happens to price is demand experinces change
price will experence the same change
