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23 Cards in this Set

  • Front
  • Back
market
an institution that brings together buyers and sellers of goods, services or resources
demand
schedule that shows various amounts of a product that consumers are willing to purchase at a certain price and time.
Law of demand
all else equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls(inverse relationship)
Diminishing marginal unit
buyer will get less satisfaction from each sucessive unit of product consumed. second BIG MAC will yield less satisfaction
income effect
a lower price increases the purchasing power of a buyer's money income. buyer can purchase more than they did before
substitution effect
at a lower price buyers substitute what is now a less expensive product for a simllimar product that is now more expensive
Demand Curve
downward slope relfects the law of demand
Determinants of demand/ demand shifters
factors that can affect purchases & make demand curve shift to right or left
Basic Determinants of demand
consumers taste, number of consumers in market, consumers income, price of related goods, consumers expectations about future prices.
Normal goods/Superior goods
products whose demand varies directly with money income
Inferior goods
goods whose demand varies inversly with money income
substitute good
on that can be used in place of another good
Chicken& Beef
complementary good
one that is used together wiht another good
Gas&Motor Oil
Change in demand
shift in graph, occurs because the consumers idea about purchasing the product has been altered in response to change in 1 or more of the determinants of demand.
Change in quantity demanded
movement from one point to another, caused by an increase/decrease in the price of the product under consideration.
law of supply
as price rises, the quantity supplied rises, as price falls, the quantity supplied falls(direct relationship)
marginal cost
cost of producing one more unit of output
Determinants of Supply
resource prices, technology, taxes and subslides, prices of other goods, price expectations, number of sellers in market
Equillibrium price and quantity
indicated by intersection of the supply and demand curves for a product.
What effects the change in demand?
Tastes, Number of Buyers, Income, Prices of related goods,and expectations
What effects the change in supply?
Resource prices, technology, taxes, prices of other goods, price expectations, and number of sellers.
price ceilings
sets the maximum legal price a seller may charge for a product or service.
price floor
a minimum price fixed by the government.