Supply and Demand/intro Flashcards
The marginal principle
Decision making rule when you are dealing with a “how much of something”
Choose the option that MB=MC
The cost-benefit principle
The costs and benefits of options are what drive us in decision making
The opportunity-cost principle
Everything you give up when you make a decision is the opportunity cost
The interdependence principle
The principle that decision making is based on the overall context and decisions
fixed costs
Costs that stay constant no matter what
variable costs
A cost that changes depending on the amount of production
rational rule for sellers
Rule that sellers should sell and produce a good only if it’s price is greater than or equal to the marginal cost of producing it
rational rule for buyers
Buyers should only purchase goods if the marginal benefit is greater than or qual to the price
marginal product
The amount of product gained from adding an input into the business
diminishing marginal product
When the output gained from an added input is not as great as the last input
supply curve shifters
-changes in input prices
-changes in the price or related goods
-Changes in expectations
-changes in technology
-changes in the number of producers
demand curve shifters
-change in price of related goods
-Changes in income
-change in expectations
-change in # of consumers
-changes in preference
-network congestion effects
The four main principles of Economics
Cost-Benefit principle, Opportunity Cost principle, Marginal principle, Interdependence principle
Willingness to pay
how much you are willing to pay for this good/service?
Production Possibilities Frontier
Graph that depicts the possible production options with the amount of resources given
Trade-offs
what you give up when you make a decision
Marginal Principle
Principle used to decided how much of something to buy (incrementally)
Marginal Benefit
the added benefit from one more of something
Marginal Cost
the added cost of buying one more of something
Rational Rule
this rule says you should keep on doing something until the marginal benefits equals the marginal cost
Interdepence choice
the awareness that your best choice is dependent on the other choices
Positive statement
Factual statements that can be proven
Normative Statements
statements that are made based on opinion and belief about what should be done/considered.
Law of Demand
As price increases, consumers demand a lower quantity of good
Law of Supply
As the price increases the quantity supplied will increase
Marginal benefit
the added benefit you get from one more unit of good
Marginal cost
the extra cost of one more of something
absolute advantage
the option that has the overall most benefit at making/producing something
comparative advantage
which option has less opportunity cost
What is Market quantity supplied?
the total of all producer’s individual quantity supplied
If the price of a good’s input increases, what happens to the supply curve?
The supply curve will shift left (supply decreases)
If the price of a complement in production increases, what happens to the supply?
The supply (curve) will increase
If the price of a complement in production decreases, what happens to the supply?
The supply (curve) will decrease
If the price of a substitute in production increases then what happens to supply?
The supply (curve) will decrease
if the price of a substitute in production decreases, what happens to supply?
The supply (curve) will increase
If expected prices are to increase in the future, how does this affect supply right now?
The supply (curve) will decrease
If expected prices are to decrease in the future, how does this affect supply right now?
The supply(curve) will increase
Technological advancements in production cause supply to…
shift right/increase
If more producers enter the market then supply…
Increase/shifts right
if producers leave the market then supply…
decreases/shifts left
