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27 Cards in this Set

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A schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time.
Demand
The inverse relationship between price and quantity demand
Law of demand
Successive units of a particular product yield less and less satisfaction.
Diminishing marginal utility
A lower price increases the purchasing power of a buyer's money income
Income effect
At a lower price buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive.
Substitution effect
Factors other than price that can and do affect purchases
Determinants of demand
What are the 5 determinants of demand?
1. Consumers' tastes
2. The number of buyers in the market
3. Consumers' incomes
4. The prices of related goods
5. Consumer expectations
Products whose demand varies directly with money income; superior goods
Normal goods
Goods whose demand varies inversely with money income
Inferior goods
A good that can be used in place of another good
Substitute good
A good that is used together with another good
Complementary good
A shift of the demand curve to the right (increase) or to the left (decrease).
Change in demand
A movement from one point to another point, from one price-quantity combo to another
Change in quantity-demand
A schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period.
Supply
The direct relationship between price and quantity supplied
Law of supply
The factors other than price that can and do impact supply
Determinants of supply
What are the basic 6 determinants of supply?
1. Resource prices
2. Technology
3. Taxes and subsidies
4. Prices of other goods
5. Producer expectations
6. The number of sellers in the market
A shift in the supply curve to the left (increase) or the right (decrease)
Change in supply
Movement from one point to another, from one price-quantity supplied combo to another.
Change in quantity supplied
Where the intentions of buyers and sellers match.
Where the demand curve meets the supply curve
Equilibrium price
The quantity at which the intentions of buyers and sellers match.
Where the demand curve meets the supply curve
Equilibrium quantity
Created by an above-equilibrium price, quantity supplied exceeds quantity demanded
Surplus
Created by a below-equilibrium price, quantity supplied is less than quantity demanded
Shortage
The production of any particular good in the least costly way
Productive efficiency
The particular mix of goods and services most highly valued by society
Allocative efficiency
Sets the maximum legal price a seller may charge for a product or service. Can lead to a shortage.
Price ceiling
Sets the minimum legal price a seller may charge for a product or service. Can lead to a surplus.
Price floor