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37 Cards in this Set

  • Front
  • Back
Market
A group of Buyers and sellers
Competitive Markets
1) Homogeneous goods
2) Many buyers and sellers
Quantity Demand
Amount of a good that buyers are willing and able to purchase
The Law of Demand
----OTHER THINGS ARE EQUAL----The higher the price of a good the lower the quantity demanded.
(Visa Versa)
Demand Curve
SLOPES DOWN- Graphical relationship between price(P)and Quantity demand(Q).
Market Demand
The sum of all individual demands for a good or service.
Movement ALONG the demand curve. (Same as Supply curve)
Change in the PRICE of a good leads to the change in quantity demanded of that good.
Variables that shift DEMAND
NOT PRICE!!
1) Income
2) Prices of related goods
3) Tastes and preferences
4) Expectations
5) Number of buyers
1) Income
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.
2) Prices of related goods
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.
Quantity Supply
The amount of a good that sellers are willing and able to produce.
(Supply Curve shifts UP!)
Law of Supply
----OTHER THINGS EQUAL----
The HIGHER the price of a good, the HIGHER the quantity supplied.
Market Supply
The sum of all supplies of all sellers at various prices.
Input Prices
A) HIGHER input Price
=>HIGHER production cost.
=>DECREASE supply

B) LOWER input price
=>LOWERS production cost.
=>INCREASE supply
Technology
A) INCREASE in tech.
=>LOWERS production cost.
=>INCREASE supply

B) DECREASE in tech.
=>HIGHER production cost.
=>DECREASES supply
Market
A group of Buyers and sellers
Competitive Markets
1) Homogeneous goods
2) Many buyers and sellers
Quantity Demand
Amount of a good that buyers are willing and able to purchase
The Law of Demand
----OTHER THINGS ARE EQUAL----The higher the price of a good the lower the quantity demanded.
(Visa Versa)
Demand Curve
SLOPES DOWN- Graphical relationship between price(P)and Quantity demand(Q).
Market Demand
The sum of all individual demands for a good or service.
Movement ALONG the demand curve. (Same as Supply curve)
Change in the PRICE of a good leads to the change in quantity demanded of that good.
Variables that shift DEMAND
NOT PRICE!!
1) Income
2) Prices of related goods
3) Tastes and preferences
4) Expectations
5) Number of buyers
1) Income
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.
2) Prices of related goods
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.
Quantity Supply
The amount of a good that sellers are willing and able to produce.
(Supply Curve shifts UP!)
Law of Supply
----OTHER THINGS EQUAL----
The HIGHER the price of a good, the HIGHER the quantity supplied.
Market Supply
The sum of all supplies of all sellers at various prices.
Input Prices
A) HIGHER input Price
=>HIGHER production cost.
=>DECREASE supply

B) LOWER input price
=>LOWERS production cost.
=>INCREASE supply
Technology
A) INCREASE in tech.
=>LOWERS production cost.
=>INCREASE supply

B) DECREASE in tech.
=>HIGHER production cost.
=>DECREASES supply
Equalibrium
The price at which quantity supplied EQAULS quantity demanded. (Qs-Qd=Surplus)
(Qd-Qs=Shortage)
Price Elasticity of Demand
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)
Elastic Demand
quantity demand responds SUBSTANTIALLY to change in price.(Luxuries)
Inelastic Demand
quantity demand respnds SLIGHTLY to change in price.
(Food,Gas)
Factors that influence price elasticity of demand.
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
Prices of Elasticity of demand
Greater than 1-> Elastic
Less than 1-> Inelastic (Price is ^ than demand)
If Equal to 1-> Unit Elastic
Total Revenue
Price (P) X Quantity (Q)

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

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