The Market Flashcards
What is the law of demand?
As price increases, quantity demanded decreases, ceteris paribus, vice versa.
What is the law of supply?
As price increases, quantity supplied increases, ceteris paribus, vice versa.
When the price decreases, the product becomes?
Relatively more affordable.
Consumers become what when the price decreases?
More willing and able to purchase the product?
Businesses will do what to restore equilibrium from a surplus?
Reduce prices to clear excess stock.
Consumers will do what to restore equilibrium from a shortage?
Bid up the price.
Consumers will do what to restore equilibrium from a shortage?
Bid up the price to avoid missing out on a good.
When will producers decrease their quantity supplied?
When the product is relatively less profitable to produce.
When will consumers increase their quantity demanded?
When the product is now relatively more affordable - customers are now more willing and able.
Consumer spending equals what?
Pe*Qe
What is disposable income?
Income after taxes have been paid and benefits have been added.
What are indirect taxes?
Taxes on goods and services.
If a tax has been imposed, the supply curve shifts..?
Upwards
After being drawn, S + Tax hits the original supply curve to give what?
Price that producers receive.
What does tax cause?
Causes consumers to pay a higher price but producers to receive a lower price.
