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39 Cards in this Set
- Front
- Back
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Markets- "Private Economy"
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any arrangement which brings buyers and sellers together for the purpose of trading goods and services
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Product Markets
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households: goods and services recievers spend money
businesses: give goods and services- make money |
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Resource Market
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Households-make money- lose resources
businesses- spend money- gain resources |
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Demand
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shows the relationship between a product consumers purchase at diff prices during a sepcific time period other factors held constant
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As a price of the product falls
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the quantity demanded increases
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a change in quantity demanded of a good
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refers to movements along a given demand curve
RESULT-change in the price of good |
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change in demand
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refers to a shift outward or inward of the demand curve
RESULT- a change in any determinant of demand other than the price in question |
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supply
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shows relationship between various amounts of a product being produced at diff prices during a specific time, other factors held constant
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as the price of a product rises (Supply)
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the quantity supplied increases
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as the price of a product falls (Supply)
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the quantity supplied decreases
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price and quantity of a product
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are positively or directly related
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law of increasing relative opportunity costs
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price and quantitiy of a good are positively related
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change in quantity supplied
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refers to movements along a given supply curve
RESULT- change in the price of the good |
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change in supply for a good
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shift outward or inward in the supply curve
RESULT- change in any determinant of supply other than good in question |
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Equilibrium
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implies a situation where there is no incentive to change
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If quantity demanded is greater than quantity supplied at market price
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a shortge will exsist and prise will raise
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if quantity supplied is greater than quantity demanded at market price
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a surplus will exsist and price will fall
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cieling price is binding only when
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it is set below the equilibrium price
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elasticities
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-one viariable changes and the other responds
-measures strength of response in percentage terms |
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elasticity change in price of x
(ex: change in study time) |
causes change in quantity of x
(changes amt of time head hurts) |
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Elasticity
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= %change response variable
-------------------------- %change in causal variable |
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Elastic
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greater than 1
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inelastic
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less than 1
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Unit Elastic
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elasticity = 1
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elasticity 2
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very responsive
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elasticity .2
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not very responsive
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Price Elasticity for good X
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% change in quantity demanded of X (Qx)
--------------------- = Exx % change in price of X (Px) |
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elastic demand
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when percentage change in quantity demanded EXCEEDS the percentage change in price
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inelastic demand
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when the percentage change in quantity demanded is LESS than the percentage change in price
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Unit Elastic Demand
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when the percentage change in the quantity demanded EQUALS the percentage change in price
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total revenue
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= price of unit x # of units
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Elasticities Quantity Effect
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cells on right side
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Elasticities Price Effect
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Cells on top
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Elasticities common ground
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cells where price and quantity effects overlap
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when price elasticity of demand = 1
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there is no change in total revenue
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when numerator > denominator
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P rises TR falls
P falls TR rises |
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when numerator < denominator
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P rises TR rises
P falls TR falls |
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when numerator = denominator
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P rises TR unchanged
P falls TR unchanged |
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point price elasticity of demand
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-delta Q P1
------- * ----- -Delta P Q1 |
