How markets work Flashcards
(19 cards)
what is the definition of supply
Quantity of a good or service that all firms plan to sell
how do you define demand?
Measures the extent to which the demand for a good changes in response to a change in price
Equilibrium
Where supply and demand meet
Factors of Production
Land, Labour, Capital, Enterprise
PPF
A curve depicting the various combinations of two products that can be produced when all resources are fully employed
Positive statement
Statements that can be proven
Normative statement
Statements that are based on value judgement
Opportunity cost
The cost of giving up your second option
Income elasticity
% change in income
Price elasticity of demand
% change in price
Cross elasticity of demand
% change in price of product B
Elasticity of supply
% change in price
Shortage
Below equilibrium, not enough
Surplus
Above equilibrium, too much
Ceteris Paribus Assumption
When looking at demand for one firm, freezes all factors but one
Productive efficiency
Occurs when it is impossible to produce more of one good without producing less of another
Allocative efficiency
When the available economic resources are used to produce the combination of goods and services that best matches people’s preferences.
Shifting curve to the left
When the demand goes down
Shifting curve to the right
When the demand goes up
