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28 Cards in this Set
- Front
- Back
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What is the Law of Demand?
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Principle that there is an inverse relationship between the price of a good + the quantity buyers are willing to purchase in an amount of time. (Price goes up, quantity demanded goes down, etc.)
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What is Demand?
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Curve showing the various quantities of a good consumers are willing to buy at possible prices during an amount of time.
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What is Market Demand?
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It is the sum of the individual demands
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What are Nonprice Determinants (Demand Shifters)?
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Factors that can influence the position of the demand curve
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What are the 5 main Demand Nonprice Determinants?
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1. # of buyers
2. Tastes and preferences 3. Income 4. Expectations of future price changes, income, etc. 5. Prices of related goods |
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What is Change in Quantity Demanded?
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Movement between points ALONG a stationary demand curve, ceteris paribus.
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Any decrease in price along the vertical axis will cause an increase or a decrease in the quantity demanded?
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Decrease in price will cause an increase in the quantity demanded!
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What is Change in Demand?
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It is an increase or decrease in the quantity demanded at each possible price.
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Changes in what shift the demand curve?
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Changes in NONPRICE DETERMINANTS shift the demand curve left or right.
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What is a Normal Good?
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Any good with direct relationship between changes in income and demand
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What is an Inferior Good?
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Any good with inverse relationship between changes in income and demand.
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What are Substitute Goods? Example?
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A good that competes with another good for consumers. *Coke and Pepsi
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What is the result of changes in price for 1 good and the demand for its substitute "competitor" good.
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Direct relationship. If price for one goes up, then the demand for the second will increase!
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What are Complementary Goods? Example?
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A good that is jointly consumed with another good. *Hot dogs and hot dog buns
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What is the result of changes in price for 1 good and the demand for its complement good?
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Inverse relationship. If the price of hotdogs goes up, then the demand for hot dog buns will decrease.
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What is the Law of Supply?
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Principle that there is a DIRECT relationship between the price of a good and the quantity sellers are willing to sell in a given amount of time.
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What is Supply?
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Curve showing various quantities of goods sellers are willing to make and sell at possible prices in a given time.
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True or False: Only at lower prices will it be profitable for sellers to incur the higher opportunity cost associated with producing and selling a larger quantity.
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FALSE. Only at HIGHER prices will it be profitable.
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What is Market Supply?
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It is the sum of the individual supplies
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What are Nonprice Determinants (Supply Shifters?
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Factors that can influence the position of the supply curve
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What are 6 Supply Nonprice Determinants?
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1. # of sellers
2. Technology 3. Resource prices 4. Taxes + subsidies 5. Expectations 6. Prices of other goods |
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Under the law of supply, any increase in price along the vertical axis will cause an increase or decrease in the quantity supplied?
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An increase in price will cause an increase in the quantity supplied.
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What is a Market?
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Any arrangement in which buyers and sellers interact to determine the price and quantities of goods exchanged
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What is Surplus?
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Market condition that exists at any price where the quantity supplied is GREATER THAN the quantity demanded.
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What is Shortage?
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Market condition that exists at any price where the quantity supplied is LESS THAN the quantity demanded.
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What is Equilibrium?
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Market condition that occurs at any price and quantity where quantity supplied is EQUAL TO the quantity demanded.
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If there is only an increase in Demand, what happens to the equilibrium price and quantity supplied?
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If there's an increase in demand, equilibrium and quantity supplied increase!
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If there is only a decrease in Demand, what happens to the equilibrium price and quantity supplied?
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If there's a decrease in demand, equilibrium and quantity supplied decrease!
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