Supply and Demand Flashcards
law of demand
when the prices lower, consumers will buy more
Demand
desire to own something and the ability to pay for it
substitution effect
as prices rise, alternatives are found
demand curve
A graph that shows demand based on price
four factors leading to a change in demand
income, consumer expectations, population, and advertising
elasticity of demand
consumers react to a change in price
inelastic demand
demand not very sensitive to a change in price
elastic demand
demand that is very sensitive to a change in price
equilibrium
when quantity demanded quantity supplied are equal
disequilibrium
when quantity demanded is not the same as quantity supplied
Price ceiling
maximum price that can be charged for a good
Price floor
minimum price for a good
surplus
quantity supplied is more than quantity demanded
shortage
quantity supplied is less than quantity demanded
supply
amount of goods available
law of supply
higher the price, the more that is produced
supply curve
a graph that shows supply based on price
fixed costs
cost that doesn’t change no matter how much is produced
variable costs
costs that rise or fall based on the quantity produced
total cost
fixed and variable costs together
marginal cost
The additional cost of producing one or more unit
subsidy
Government payment that supports a business or market
excise tax
text on a production or sale of a good
