Economic Business Cycles Flashcards
Quantity Demanded Definition
how much consumers are willing to demand at certain price levels
what happens when there is a change in price
it’s a movement along the demand curve or a change in quantity demanded.
Causes of a shift in the demand curve
Increase or decrease in:
-Income.
- Taxes.
- Savings Rate.
- Disposable Income.
Definition of Supply
quantity of a good or service that businesses are willing to supply at a given price
Relationship between price and supply
higher the price, the more suppliers are willing to supply. The lower the price, the less suppliers are willing to supply.
This will be a change in quantity supplied
Causes of supply curve shift
Technology.
- Competition.
- Anything other than price (this will move along the current supply curve )
Slope of the supply curve and demand curve
supply - Starts flat and increases steeply from left to right
Demand - starts steeps and decreases steeply from right to left
The Price of product A increases leading to a decrease in the quantity demanded of product B - what is this an example of
Complements
The Price of product A increases leading to a Increase in the quantity demanded of product B - what is this an example of
Subsitutes
Elastic demand definition & examples
Quantity demanded responds significantly to changes in price.
If price increases consumers won’t buy bc it isn’t a need and they can go without
ex: luxury goods
inelastic demand definition & examples
Quantity demanded changes very little to changes in price
If price increases consumers will still buy bc the product is a necessity, something they can’t live without
Ex: Groceries
What does CPI stand for and Measure
Consumer Price Index
price change in a basket of goods and services at the retail level.
What does PPI stand for and Measure
Producer Price Index
price changes in the wholesale and manufacturing sectors.
If a good is inelastic and the price of that good increases, what affect would it have on the total amount that is spent on that good
The total amount spent would increase
This is because the demand wouldn’t change much because people will need it, thus they would pay a greater price for it. Similar demand and increase in price = greater amount spent on a product.
What are the components of the business life cycle
Expansion
Peak
Contraction/Recession
Trough
