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29 Cards in this Set
- Front
- Back
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Incentives |
rewards and penalties that moderates behavior |
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opportunity cost |
the value of the opportunity lost |
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inflation |
increase in the general level of prices |
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comparative advantage |
producing goods for which it has the lowest opportunity cost |
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demand curve |
function that shows the quantity demanded at different prices |
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quantity demanded |
quantity that buyers are willing and able to buy at a particular price |
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consumer surplus |
consumer's gain from exchange, or the difference between the maximum price a consumer is wiling to pay for a certain quantity and the price market |
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total consumer plus |
measured by area beneath the demand curve and above the price 1/2(b*h) |
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demand shifters |
income population price of substitutes price of complements expectations tastes |
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normal good |
good for which demand decreases when income increases |
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inferior goods |
good for which demand increases when income increases |
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substitutes |
a decrease in the price of one good leads to a decrease in demand for the other good |
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complements |
decrease in the price of one good leads to an increase in the demand for the other good |
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supply curve |
function that shows the quantity supplied at different prices |
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quantity supplied |
amount of good that sellers are willing and able to sell at a particular price |
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horizontal reading |
read the side then the bottom |
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vertical reading |
read the bottom to the side |
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producer surplus |
producer's gain from exchange, or the difference between the market price and the minimum price at which a producer would be willing and able to sell a particular quantity |
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total producer surplus |
measured by area above the supply curve and below the price |
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supply shifters |
taxes and subsidies expectations entry or exit of producers changes in opportunity costs technological innovations and changes in the price of inputs |
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surplus |
situation in which the quantity supplied is greater than the quantity demanded |
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shortage |
a situation in which the quantity demanded is greater than the quantity supplied |
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equilibrium price |
the price at which the quantity demanded is equal to the quantity supplied |
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equilibrium quantity |
the quantity at which the quantity demanded is equal to the quantity supplied |
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elasticity of demand |
measures how responsive the quantity demanded is to a change in price; more responsive equals more elastic |
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Elasticity of demand equation |
percent change in quantity demanded over percent change in price |
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Revenue equation |
price*quantity |
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elasticity of supply |
measures how responsive the quantity supplied is to a change in price |
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elasticity of supply equation |
percent change in quantity supplied over percent change in price |
