How Markets Work Flashcards
What is the definition of supply??
Quantity of a good/service that all firms plan to sell
Definition of demand
When the demand for a product changes due to the change in price
What is equilibrium
Where the supply and demand curve meet
Factors of production?
Land, labour, capital, enterprise
Positive and an example
Something that can be proven with a valued judgement such as: the sky is blue
Normative and an example
An opinion of something such as: Messi is the best at football
PPF statement and what is it?
Production possibility frontier and it shows maximum output combinations of 2 goods when all resources are used fully and efficiently.
price elasticity of demand
% change in quanitity demanded
% change in price
income elasticity
% change in quanity demanded
% change in income
cross elasticity of demand
% change quantity demand of product A
% change in price of product B
elasticity of supply
% change in quantity supplied
% change in price
shortage
below the equilibrium which is not enough resources
surplus
above equilibrium and using too many resouces
ceteris paribus assumption
it freezes all factors except one when looking into demand of one firm
productive efficiency
when you can’t make more of one good without producing less of another product
allocative efficiency
where goods/services are produced to please the needs of the customers.
left shifting curve
change in production cost and supply and demand decreases
right shifting curve
there’s a change in production cost and the supply and demand increases when the curve moves right.
production possibility diagrams
shows points where all informations used. below the curve is the recession.
