Market & Prices Flashcards
Supply and Demand
what is demand?
a schedule/table of various quantities of a good or service an individual is willing and able to consume at various quantities
what is the law of demand?
lower the price, greater the quantity consumed
what is marginal utility?
receiving greater satisfaction when you acquire one or more good/service, falls the more units you acquire, rises when we buy
what is the rationale of marginal utility?
diminishing marginal utility (falling extra value/usefulness) and the income effect
what is market demand?
horizontal sum of individual demand schedules
what is quantity demanded?
a specific amount of a product at some specific price (a change in price is the only cause of a change in quantity demanded)
what does demand consist of?
all the quantities at all possible priced (the entire schedule/curve) (shift right/left) (increase/decrease)
what are the determinants/factors of demand?
income, # of consumers, taste and preferences, prices of related goods, future price expectations
what is income?
the more money made, the more money spent on products, less money made, less money spent
what are the 2 goods associated with income?
normal and inferior goods
what is a normal good?
a good whose demand changes directly w/changes of income (income increases, demand increases and vice versa)
what is an inferior good?
a good whose demand changes inversely w/changes of income (income increases, demand decreases and vice versa)
what is # of consumers?
more consumers, more demand, less consumers, less demand
what is taste and preferences?
taste increases, demand increases and vice versa
what are the 3 types of goods under prices of related goods?
substitute, complement and independent
what is a substitute good?
price (coke) increases, demand (pepsi) increases and vice versa
what is a complement good?
price (coke) decreases, demand (rum) increases and vice versa
what is an independent good?
price (iphone) decreases, demand (coke) ?, (no relationship between)
what are future price expectations?
price (future) increases, demand (present) increases and vice versa (ex. buying stock now to expect value to get better, could be wrong)
what is supply?
a schedule/table of various quantities of a good or service a seller is willing and able to offer the market at various prices
what is the law of supply?
the higher the price, the greater the quantity supplied
what is the rationale of law of supply?
higher prices = greater revenue, higher per unit (marginal) cost of production
what type of slope does demand have?
downward
what type of slope does supply have?
upward
