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20 Cards in this Set
- Front
- Back
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Invisible Hand
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the price mechanism; the rise and fall of prices that guide our actions in the market
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Law of Demand
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– Quantity demanded rises as price falls (price and demand are inversely related)
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Demand Curve
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– a graphical representation of the relationship between price and quantity demanded
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Demand
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– the amount of a good that will be bought per unit of time at various prices (other things constant)
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Quantity Demanded
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– the amount of a good per unit of time that will be demanded at a specific price (other things constant)
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Movement along a demand curve
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– graphical representation of the effect of price on the quantity of a good demanded
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Shift in Demand
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– graphical representation of the effect of anything other than price on demand
Change in price causes movement along a demand curve; change in shift factor causes a shift in demand |
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Shift factors of demand
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– Income (higher income = higher demand), price of other goods (lower price of other goods = lower demand for this product), tastes, expectations (what you expect will happen in the future), taxes and subsidies
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The Demand curve represents the ______ price that an individual will pay
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maximum
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Market Demand Curve
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a horizontal sum of individual demand curves
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Law of Supply
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– Quantity supplied rises and price rises, other things constant (price and supply are directly related)
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Supply
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: quantities of supply a seller is willing to sell per unit of time at various prices (refers to entire supply curve)
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Quantity supplied
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: specific amount that will be supplied at a specific price (a point on the supply curve)
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Movement along a supply curve
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: graphical representation of a change in price on the quantity supplied
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Shift in Supply
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– graphical representation of the effect of a change in a factor other than price on supply; shift in the entire supply curve
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Shift Factors of supply
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– Price of inputs (higher costs = less supply), Technology (better technology = more supply), Expectations (if a supplier expects prices to rise, the supplier may store some of today’s output for later to reap higher profits, decreasing supply now and increasing it later), Taxes (taxes on suppliers decrease supply), and Subsidies (subsidies increase supply)
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Market Supply Curve
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– horizontal sum of all individual supply curves
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Equilibrium Quantity
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– the amount bought and sold at the equilibrium price
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Equilibrium Price
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– the price toward which the invisible hand drives the market
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Excess supply
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– suppliers will lower prices and demanders will buy more
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