LW4 Flashcards
Price
Amount of money a buyer has to give up in order acquire something
Cost
payments to factor inputs in production
Market
Is not a place but any situation where the buyer and sellers engage in an exchange
The quantity supplied
The amount that sellers are willing and able to sell at a particular price
Law of supply
shows how price affects the producer
Supply schedule
Shows the relationship between price and the quantity supplied
The supply curve
Graphical display of the supply schedule
Market supply
the sum of all the supplies of all sellers of a particular good or service.
Market supply curve
It shows how the total quantity supplied of a good varies with the price of the goods holding constant all other factors.
A movement in supply
It is caused by change in a price
A shift in supply
It is caused by a factor affecting supply of other than a change in price
Input price
When production costs go up, supply goes down
When cost go down, supply goes up
Technology/ Productivity
When productivity goes up, supply goes up
When productivity goes down, supply goes down
Expectations
Ex.: If sellers expect the price of a good to increase they decrease current levels of supply
The number of sellers
More sellers in a market, increased supply
Fewer sellers in the market, decrease supply
The quantity of demand
Amount of the good that buyers are willing and able to purchase at each and every price level
Law of demand
When price goes up, demand goes down
When price goes down, demand goes up
The demand schedule
Shows the relationship between price of a good and the quantity demand
The demand curve
Is graphical display of the demand schedule
The market demand
Is the sum of all the individual demands for a particular good or service
A movement in demand
It occurs when there is a change in price
A shift in demand
Is caused by a factor affecting demand other than a change in price such as
What can shift demand :
Income ( Income effect )
When income goes up, costumers buy more
When income goes down, costumers buy less
Inferior goods
a good whose demand drops when people’s incomes rise
What can shift demand :
Prices of related goods
When the price of a product increases, consumers may move to substitute products
What can shift demand :
Advertising/Taste
Advertising change demand
Taste change overtime what can change demand
What can shift demand :
Population
More people, more sales
What can shift demand :
Costumers expectation
Of costumers expect the price of product decrease, they may decrease their current purchase of that product
Equilibrium
Price where quantity supplied equals quantity demand
Surplus
Above the equilibrium price there is a surplus
Shortage
Below the equilibrium price there is a shortage
Law of supply and demand
Claims that the price adjusted so that the equlibrium point is reached
Elasticity
is a measure of how much buyers and sellers respond to changes in market conditions. It is measure how far supply and demand change in response to changes in price
The price elasticity of supply
Measure how much the quantity supplied responds to changes in the price
The elasticity of demand
Measures how much the quantity demand responds to a change in price
