Unit 2: Economics Final Exam Review Flashcards
Supply
The various quantities a producer is willing and able to produce at different prices at a particular time and place.
Shifters of Supply
GET IN: Changes in government regulation, changes in Expectations of future prices, changes in Technology, changes in Input costs (factors of production), changes in the Number of producers.
If producers expect higher prices in the future, what will they do today?
Decrease the supply.
If input costs to produce a good decrease, then the supply will
Increase
If input costs to produce a good increase, then the supply will
Decrease
If more companies enter the market to produce a certain good, then the supply for that good will
Increase
If companies that make lawnmowers go out of business, then the supply for the lawnmowers will
Decrease
The Law of Supply
As price increases, quantity supplied increases.
Demand
The various quantities consumers are WILLING and ABLE to buy of a good or service at different prices during a particular time and place.
Quantity Demanded
The quantity purchased at a specific price.
Law of Demand
As the price increases, the quantity demanded decreases.
Causes for a change in demand.
INEPT: Income change of consumers, Numbers of consumers change (change in population), Expectations of price or availability change, Price of other goods change (complements and substitutes), Trends, tastes, fads change.
Substitutes
Products that can be used in place of each other. Ex: Coke and Pepsi.
Elasticity
Measures how much quantity changes when the price changes.
Inelastic Demand
When the price effect is small
What makes demand elastic?
More substitutes, more expensive, more time to buy.
Market equilibrium
The point where the supply and demand curves intersect.
Shortage
When the price is bellow the equilibrium price.
Surplus
When the price is above the equilibrium price.
Price ceiling
Shortage
Price floor
Surplus
Perfect Competition
Largest numbers of sellers, identical product, easy entry/exit, no market power.
Monopolistic Competition
Large number of sellers, similar but not identical product, easy entry/exit to the market, limited amount of market power.
Oligopoly
Smal number of sellers, identical or similar product, difficult entry, large amount of market power.
