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