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31 Cards in this Set
- Front
- Back
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Market
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A group of buyers and sellers of a <b><i>particular</i></b> good or service
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Buyers--Demand
Suppliers--Supply |
yes
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Price and quantity are determined by all buyers and sellers as they interact in the marketplace
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true
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Competitive Market
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A market in which there are many buyers and many sellers so that each has a negligible impact on the market price
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Quantity Demanded
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The amount of a good that buyers are willing and able to purchase
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Law of Demand
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The claim that, other things equal, the quantity demanded (shifts along the curve) of a good <b>falls</b> when the price of the good <i>rises</i>
when price falls the Q. demanded rises |
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Demand Schedule
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A table that shows the relationship between the price of a good and the quantity demanded
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Demand Curve
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A graph of the relationship between the price of a good and the quantity demanded
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Market Demand
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The sum of all the individual demands for a particular good or service
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Shifts of the Demand Curve to the right is called ____
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an <i>"Increase in demand<i />"
Occurs when a change increases the quantity demanded at EVERY price |
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Factors that cause a shift in the Demand Curve:
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Income
Prices of Related Goods (substitutes-cause ceiling on prices firms can charge lowering the profitability) Tastes (Like the summer weather changing peoples tastes for MORE icecream/lemonade) Expectations Number of Buyers |
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Normal Good
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Name for a good when the demand for the good falls as income falls
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Inferior Good
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a good for which, other things equal, an <b>increase</b> in income leads to a <i>decrease</i> in demand
like a bus-pass or refurbished goods |
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Substitutes
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Two goods for which an increase in the price of one leads to an increase in the demand for the other (ice cream & frozen yogurt)
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Complements
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Two goods for which an increase in the price of one leads to a decrease in the demand for the other
Cars and gasoline Ice cream and hot fudge |
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When does a shift occur?
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when there is a change in a relevant variable that is NOT measured on either axis.
<b>Increase (shift) in Demand</b> Income Tastes Expectations <b>Shift (increase) in Supply</b> Input Prices (costs) # of suppliers Expectations |
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Quantity supplied
(movement along the curve) |
the amount of a good that sellers are willing and able to sell
higher when price is higher |
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Law of Supply
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the claim that the quantity supplied of a good rises when the price of the good rises
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Supply Schedule
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Table that shows the relationship between the price of a good and the quantity supplied
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Supply Curve
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a graph of the relationshp between the price of a good and the quantity supplied
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many Variables tht can shift the supply curve:
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Input Prices
(-The supply of a good is negatively related to the price of the inputs used to make the good) Technology Expectations Number of Sellers |
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A curve shifts only when there is a change in a relevant variable that is not named on either axis
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true
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Equilibrium
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A situation in which the market price has reached the level at which quantity supplied equals quantity demanded
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Equilibrium Price
(Market Clearing Price:buyers have bought all they want to buy and sellers have sold all they want to sell) |
The price that balances quantity supplied and quantity demanded
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Equilibrium Quantity
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The quantity supplied and the quantity demanded at the equilibrium price
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Surplus
(excess supply) |
A situation in which quantity supplied is greater than quantity demanded
Suppliers respond to a surplus by cutting prices, which increases demand |
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Shortage
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a situation in which quantity demanded is greater than quantity supplied
Suppliers respond by raising prices which decreases demand and moves the market toward equilibrium |
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The Law of Supply & Demand
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The claim that the <i>price</i> of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
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Three steps for Analyzing Changes in Equilibrium
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1. Decided whether the event shifts the supply or demand curve (maybe both)
2. Decide in which direction the curve shifts 3.Use the supply and demand diagram to see HOW the shift changes the equilibrium price and quantity |
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Supply Vs. Quantity Supplied
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Supply: refers to the position of the supply curve (shifts)
Quantity Supplied: refers to the amount suppliers wish to sell (movements along the curve) |
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A movement along the supply or demand curves are called a "change in the quantity supplied (or demand)"
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A SHIFT of the supply or demand curve is called "a change in DEMAND (or supply)"
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