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12 Cards in this Set
- Front
- Back
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Market |
Any place where buyers and sellers meet to exchange goods and services |
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What is the key to markets? |
Voluntary exchange: the buyer and the seller willingly make a transaction because they both get something they value more than what they're giving up out of it (e.g. a consumer of strawberries values the strawberries more than the money he paid to get them, while the seller values the money more than the strawberries) |
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Price Signals |
The information that markets generate to guide the distribution of resources |
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What is the ideal result of voluntary exchange? |
That sellers can't make themselves better off without producing something that also makes buyer better off |
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How is it decided where resources are allocated? |
Price and profit |
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Law of Demand |
When the price goes up, people buy less. When the price goes down, people buy more. |
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Law of Supply |
When the price goes up, there is incentive to produce more. When the price goes down, there is incentive to produce less. |
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Surplus |
When the price is high, producers want to produce more, but buyers don't want to buy them |
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Shortage |
When the price is low, buyers want to buy a lot, but producers don't have an incentive, so they produce very little |
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Equilibrium Price |
The price at which the quantity of a product offered is equal to the quantity in demand |
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Equilibrium Quantity |
The quantity demanded or supplied at equilibrium cost |
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What are the four market behaviors? |
1) Supply can increase 2) Supply can decrease 3) Demand can increase 4) Demand can decrease |
