econ unit 2 Flashcards
what does micro focus on
decisions made by individuals and firms
what influences price that consumer pay and producers charge us
quantity demanded
law of demand
when consumers are willing to buy more of a product at lower prices and less of a product at higher prices
law of supply
as price inc, businesses with increase production. as price dec, businesses will decrease production
demand curves
shows the quantity demanded at all possible prices
demand schedule
a table that lists how much of a product consumers will buy at all possible prices
marginal utility
additional usefulness a consumer gets from having 1+ unit of same product
diminishing marginal utility
Dec in usefulness from having 1+ unit of same product
substitutes
buying a Meijer brand of food instead of name brande
how does change in price impact the qd by consumers
inc in price causes a dec in quantity demanded by consumers and a decrease in price will cause an inc in qd
complements
dec in cereal price causes inc in qd for cereal and milk
elastic demand
change in price causes a ig change in qd
-food, many substitutes
inelastic demand
change in price causes relatively smaller change in qd
-gas, not many substitutes
factors causing change in demand
income effect, substitution, complements, expectations, consumer tastes
elastic supply
supply changes more than price. businesses can respond quickly to change in demand
-turkey around holidays
inelastic supply
supply changes less than price. businesses can’t respond quickly to change in demand
-oil
factors causing change in supply
tech, productivity, number of sellers, cost of resources, government regulation, expectations, taxes
messages prices send to buyers and producers
high prices: buyers buy less, producers produce more
low prices: buyers buy more, producers produce less
equilibrium price
price where quantity supplied by producers equals quantity demanded by consumers`
shortages
quantity supplied is less than quantity demanded at given price
surplus
quantity supplied is greater than quantity demanded at given price
price ceiling
highest legal price that can be charged for a product
price floor
lowest legal price that can be charged for a product
externalities and why difficult for society to handle
costs or benefits felt by 3rd party due to economic activities. can be good or bad effects people either way
pos externalities
situation where a pos impact on 3rd party due to econ activity
negative externalities
situation where a negative impact on 3rd party due to econ activity
fixed cost example
rent and salaries
variable cost example
raw materials and production supplies
