Topic 7 - Markets Flashcards
What does the supply curve show
Quantity of output that sellers are willing to supply at any given price
What are factors that affect the supply curve
How firms in the industry compete against each other ( lots of small firms or a small number of large firms)
The cost structure of firms
For a simple supply curve what do we need to be the same and why
All the products
This way every buyer is just as happy to deal with anybody, no loyalty or preferred products
Why is the supply curve typically upward sloping
The higher the price a good can get, the more suppliers are willing to supply
What do points along the supply curve show
The quantity supplied at that price
What is the elasticity of supply
The responsiveness of quantity to change in prices
What does it mean if elasticity of supply is elastic
Highly responsive to a change in price
What is excess supply
There are many sellers but not as many individuals who want to buy from them
What is excess demand
There are many individuals who want to buy but not many sellers they can buy from
What must trade between buyers and sellers be
Mutually beneficial
How can we measure if the producer or consumer is better off
Through producer/consumer surplus
What is consumer surplus
The difference between what somebody is willing to pay and what they actually pay
What is producer surplus
The difference between what the seller is willing to be paid, and what they actually get paid
What is the income effect
An increase in the price of a good will decrease the real income of the individual
What is the substitution effect
If people can they will switch away from an expensive good to a cheaper alternative
