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24 Cards in this Set
- Front
- Back
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market system: what, how, for whom? |
consumers max their satisfaction and show what goods are desired and producers maximizing profit compete to produce the desired products in the least expensive way. Distribution depends on who has the sought after factors of production. |
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market |
a place where buyers and sellers are in touch with one another and transportation costs are sufficiently low that the prices of similar articles tend to equality |
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product markets |
also called output or goods markets, but it is the mechanism for the exchange of commodities and services intended for final consumption. Ex: shoes. The firms are the suppliers and households are the demanders. |
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factor markets |
also called input markets, a market where those goods used to produce other goods are exchanged. Inputs are like land, machines, labor. (note: things in product markets can also be in factor markets in other production processes.) |
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Consumer |
supplies factors and demands products/goods ie. commodities and services
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producer |
supplies goods and demand factors of production
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in product markets, blank are the suppliers and blank are the demanders |
firms, households
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in factor markets, blank are the consumers and blank are the producers |
firms, households
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demand |
amount households want to purchase
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demand depends on: |
price, income, tastes, price of related goods, wealth of the household, expectations for the future, credit, information (health facts) |
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normal good |
demand for good and income are positively related
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inferior good |
demand for good and income are negatively related |
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substitute goods |
if price for one good goes up (and the demand decreases), the demand for the other goes up |
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complements |
if the price for one good goes up, the demand for the other good goes down |
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quantity demanded |
function of price, with all other things being equal. ceteris parabis |
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consumer surplus |
area below demand curve but above price, also the value above and beyond the price set for it |
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demand price |
the most at which a consumer would pay for a good (on the demand curve line)
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value of consumption |
area under the demand curve |
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producer surplus |
area below the price and above the supply curve since the supply curve demonstrates the cost. Shows the revenue captured as profit (the rest of the revenue is below the supply line and is used to cover the costs)
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revenue |
price (at which good is sold) times quantity at that price |
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price elasticity of demand |
negative % change in quantity/% change in price |
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elastic |
quantity changes a lot in response to price e is larger than 1 in magnitude
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inelastic |
quantity does not change a lot in response to price e is less than 1 in magnitude |
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la |
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