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39 Cards in this Set

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