Continue... Econ (Ch 1-5)

Front 1

Market

Back 1

A group of Buyers and sellers

Front 2

Competitive Markets

Back 2

1) Homogeneous goods
2) Many buyers and sellers

Front 3

Quantity Demand

Back 3

Amount of a good that buyers are willing and able to purchase

Front 4

The Law of Demand

Back 4

----OTHER THINGS ARE EQUAL----The higher the price of a good the lower the quantity demanded.
(Visa Versa)

Front 5

Demand Curve

Back 5

SLOPES DOWN- Graphical relationship between price(P)and Quantity demand(Q).

Front 6

Market Demand

Back 6

The sum of all individual demands for a good or service.

Front 7

Movement ALONG the demand curve. (Same as Supply curve)

Back 7

Change in the PRICE of a good leads to the change in quantity demanded of that good.

Front 8

Variables that shift DEMAND

Back 8

NOT PRICE!!
1) Income
2) Prices of related goods
3) Tastes and preferences
4) Expectations
5) Number of buyers

Front 9

1) Income

Back 9

A) Normal Good- a good for which an increase in income leads to an INCREASE in demand.

B) Inferior Good- a good for which and increase in income leads to a DECREASE in demand.

Front 10

2) Prices of related goods

Back 10

A) Substitutes- goods that can be used IN PLACE of one another. An INCREASE in price of one leads to the INCREASE in demand of the other.

B) Complements- goods used TOGETHER with one another. An INCREASE in the price of one leads to the DECREASE in demand of the other.

Front 11

Quantity Supply

Back 11

The amount of a good that sellers are willing and able to produce.
(Supply Curve shifts UP!)

Front 12

Law of Supply

Back 12

----OTHER THINGS EQUAL----
The HIGHER the price of a good, the HIGHER the quantity supplied.

Front 13

Market Supply

Back 13

The sum of all supplies of all sellers at various prices.

Front 14

Input Prices

Back 14

A) HIGHER input Price
=>HIGHER production cost.
=>DECREASE supply

B) LOWER input price
=>LOWERS production cost.
=>INCREASE supply

Front 15

Technology

Back 15

A) INCREASE in tech.
=>LOWERS production cost.
=>INCREASE supply

B) DECREASE in tech.
=>HIGHER production cost.
=>DECREASES supply

Front 16

Market

Back 16

A group of Buyers and sellers

Front 17

Competitive Markets

Back 17

1) Homogeneous goods
2) Many buyers and sellers

Front 18

Quantity Demand

Back 18

Amount of a good that buyers are willing and able to purchase

Front 19

The Law of Demand

Back 19

----OTHER THINGS ARE EQUAL----The higher the price of a good the lower the quantity demanded.
(Visa Versa)

Front 20

Demand Curve

Back 20

SLOPES DOWN- Graphical relationship between price(P)and Quantity demand(Q).

Front 21

Market Demand

Back 21

The sum of all individual demands for a good or service.

Front 22

Movement ALONG the demand curve. (Same as Supply curve)

Back 22

Change in the PRICE of a good leads to the change in quantity demanded of that good.

Front 23

Variables that shift DEMAND

Back 23

NOT PRICE!!
1) Income
2) Prices of related goods
3) Tastes and preferences
4) Expectations
5) Number of buyers

Front 24

1) Income

Back 24

A) Normal Good- a good for which an increase in income leads to an INCREASE in demand.

B) Inferior Good- a good for which and increase in income leads to a DECREASE in demand.

Front 25

2) Prices of related goods

Back 25

A) Substitutes- goods that can be used IN PLACE of one another. An INCREASE in price of one leads to the INCREASE in demand of the other.

B) Complements- goods used TOGETHER with one another. An INCREASE in the price of one leads to the DECREASE in demand of the other.

Front 26

Quantity Supply

Back 26

The amount of a good that sellers are willing and able to produce.
(Supply Curve shifts UP!)

Front 27

Law of Supply

Back 27

----OTHER THINGS EQUAL----
The HIGHER the price of a good, the HIGHER the quantity supplied.

Front 28

Market Supply

Back 28

The sum of all supplies of all sellers at various prices.

Front 29

Input Prices

Back 29

A) HIGHER input Price
=>HIGHER production cost.
=>DECREASE supply

B) LOWER input price
=>LOWERS production cost.
=>INCREASE supply

Front 30

Technology

Back 30

A) INCREASE in tech.
=>LOWERS production cost.
=>INCREASE supply

B) DECREASE in tech.
=>HIGHER production cost.
=>DECREASES supply

Front 31

Equalibrium

Back 31

The price at which quantity supplied EQAULS quantity demanded. (Qs-Qd=Surplus)
(Qd-Qs=Shortage)

Front 32

Price Elasticity of Demand

Back 32

A measure of how much quantity demand responds to a change in the price of a good.-----------------------
(% change in Q.Demanded divided by......
% change in Price)

Front 33

Elastic Demand

Back 33

quantity demand responds SUBSTANTIALLY to change in price.(Luxuries)

Front 34

Inelastic Demand

Back 34

quantity demand respnds SLIGHTLY to change in price.
(Food,Gas)

Front 35

Factors that influence price elasticity of demand.

Back 35

1) Availability of close substitutes.
a) Lots of suds.->Elastic
b) Few subs. -> Inelastic

2) Necessities vs. Luxuries
a) Necessities->Inelastic
b) Luxuries->Elastic

3) Time Horizon
a)more time after price change->
Demand Becomes ELASTIC

Front 36

Prices of Elasticity of demand

Back 36

Greater than 1-> Elastic
Less than 1-> Inelastic (Price is ^ than demand)
If Equal to 1-> Unit Elastic

Front 37

Total Revenue

Back 37

Price (P) X Quantity (Q)

Elastic(Different Dir.)
P^-TR(Down)
P(down)-TR^

Inelastic--(Same Direction)
P^-TR^
P(down)-TR(Down)