PRELIM Flashcards
The willingness and ability of the
buyer or consumer to pay for a
certain good is called
demand.
sellers or
producers, who are willing and able
to produce the goods that consumers
look for, settle in the market in the
hope of gaining profits. This
willingness and ability to produce is
called
supply
What a buyer pays for a unit of the
specific good or service is called the
price
The total number of units of goods
and services consumers are willing to
purchase at a certain prices is called
quantity demanded
ceteris paribus,
- More of a good will be bought the lower its price
- Less of a good will be bought the higher its price
Law of demand
is the total amount of
finished goods and services that suppliers
are willing and able to produce and sell in
the market at a given price.
quantity suppy
A condition of _________ is
reached when the quantity of
supply and demand are balanced
or equal at a given price level.
equilibrium
is the only price where
the desires of consumers and the desires of
producers agree—that
equilibrium price
This mutually desired amount is called the
equilibrium quantity.
is experienced when the price of a good
is above the equilibrium point. This leads to
quantity supplied in the market exceeding its
quantity demanded.
surplus
occurs when the quantity demanded
exceeds the quantity supplied.
shortage
help producers by raising prices.
price floor
help consumers by lowering
prices.
price ceiling
The degree to which the demand and
supply curves react to price changes is
referred to as
elasticity
=1
Unitary Elastic
> 1
elastic
<1
inelastic
is
important because it provides valuable insights
into how price changes affect both revenue and
consumer behavior, helping businesses and
policymakers make better decisions. Whether
you’re setting a price to maximize revenue,
deciding on taxation policies, or managing
competition, understanding how elastic or
inelastic demand is helps guide optimal
strategies.
Price Elasticity demand (PED)
The measure of percent increase in the quantity
demanded of goods and services when there is a
percent increase in the price of related goods of a
commodity.
cross elasticity demand (CED)
measures how responsive the quantity supplied
of a good is to the changes in its price
PRICE ELASTICITY OF SUPPLY
father of economics
adam smith
