Economics Chapter 4,5,6 Demand, Supply, Price

Front 1

Law of Demand

Back 1

when a good's price is lower, consumers will buy more of it (and vice versa)

Front 2

Substitution Effect

Back 2

when consumers react to an increase in a good's price by consuming less of that good and more of other goods

Front 3

Income Effect

Back 3

the change in consumption resulting from a change in real income

Front 4

Demand

Back 4

to have demand for a good you must be willing and able to buy it at the specified price

Front 5

Demand Schedule

Back 5

a table that lists the quantity of a good a person will buy at each different price

Front 6

Market Demand Schedule

Back 6

a table that lists the quantity of a good all consumers in a market will buy at each different price

Front 7

Demand Curve

Back 7

A graphic representation of a demand schedule
From left, to right price always decreases and the quantity demanded always increases (always goes down)

Front 8

Ceteris parabis

Back 8

"all other things held constant"-used when only price changes

Front 9

Change in Demand

Back 9

when ceteris parabis doesn't hold true, the entire demand curve will shift to show the change

Front 10

Normal goods

Back 10

a good consumers will demand more of when their incomes increase

Front 11

Inferior Goods

Back 11

a good that consumers demand less of when their incomes increase (ex/ used cars)

Front 12

Complements

Back 12

two goods that are bought and used together (ex/ rowboat and oars)

Front 13

Supplements

Back 13

goods used in place of one another

Front 14

Elasticity of Demand

Back 14

a measure of how consumers react to a change in price

Front 15

Inelastic demand

Back 15

demand that is not sensitive to a change in price (ex/ bypass surgery)

Front 16

Elastic demand

Back 16

demand that is very sensitive to changes in price

Front 17

unitary elastic

Back 17

the percentage change in quantity demanded is equal to the change in price (eleasticity is equal to exactly one)

Front 18

Equation for Elasticity

Back 18

percentage change in quantity demanded / percentage change in price

percentage change in price= (original #-new #)/original # times 100

Front 19

total revenue

Back 19

the total amount of money a firm receives by selling goods or services

Front 20

elasticity and revenue

Back 20

elastic:as price goes down, total revenue rises
inelastic:as price goes down, total revenue goes down

Front 21

Law of Supply

Back 21

tendency of suppliers to offer more of a good at a higher price

Front 22

quantity supplied

Back 22

the amount a supplier if willing and able to supply at a certain price

Front 23

Supply Schedule

Back 23

a chart that lists how much of a good a supplier will offer at different prices

Front 24

variable

Back 24

a factor that can change

Front 25

market supply schedule

Back 25

a chart that lists how much of a good all suppliers will offer at different prices

Front 26

supply curve

Back 26

a graph of the quantity of supplied of goods at different prices

Front 27

market supply curve

Back 27

a graph of the quantity supplied of a good by all suppliers at different prices

Front 28

elasticity of supply

Back 28

a measure of the way quantity supplied reacts to a change in price (key factor=time in business)

Front 29

Marginal product of labor

Back 29

the change in output from hiring one additional unit of labor

Front 30

increasing marginal returns

Back 30

a level of production in which the marginal product of labor increases as the number of workers increases

Front 31

diminishing marginal returns

Back 31

a level of production in which the marginal product of labor decreases as the number of workers increases

Front 32

negative marginal returns

Back 32

actually decreases overall output

Front 33

fixed cost

Back 33

a cost that doesn't change no matter how much of a good is produced (ex/ rent)

Front 34

variable cost

Back 34

a cost that rises or falls depending on how much is produced (ex/ costs of raw materials)

Front 35

total cost

Back 35

fixed costs + variable costs

Front 36

marginal cost

Back 36

the cost of producing one more unit of a good

Front 37

marginal revenue

Back 37

the additional income from selling one more unit of a good; sometimes equal to price. When marginal revenue is equal to marginal cost, this is the bets level of output

Front 38

operating cost

Back 38

the cost of operating a facility, such as a store or factory

Front 39

subsidy

Back 39

a government payment that supports a business or market

Front 40

excise tax

Back 40

a tax on the production or sale of a good

Front 41

regulation

Back 41

government intervention in a market that affects the production of a good

Front 42

equilibrium

Back 42

the point at which quantity demanded and quantity supplied are equal

Front 43

disequilibrium

Back 43

describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market

Front 44

excess demand

Back 44

when quantity demanded is more than quantity supplied (like cabbage patch dolls!)

Front 45

excess supply

Back 45

when quantity supplied is more than quantity demanded

Front 46

price ceiling

Back 46

a maximum price that can be legally charged for a good or service

Front 47

price floor

Back 47

a minimum price for a good or service

Front 48

rent control

Back 48

a price ceiling placed on rent

Front 49

minimum wage

Back 49

a minimum price that an employer can pay a worker for an hour of labor

Front 50

surplus

Back 50

a situation in which quantity supplied is greater than quantity demanded; aka excess supply

Front 51

shortage

Back 51

a situation in which quantity demanded is greater than quantity supplied; aka excecss demand

Front 52

search costs

Back 52

the financial and oppurtunity costs consumers pay when searching for a good or service (ex/ airfare to buy something in a foreign country)

Front 53

supply shock

Back 53

a sudden shortage of a good

Front 54

rationing

Back 54

a system of allocating scarce goods and services using criteria other than price

Front 55

spillover costs

Back 55

costs of production that affect people who have no control over how much of a good is produced (ex/ factory pollution)