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21 Cards in this Set
- Front
- Back
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The Law of Supply
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*rule states that price and quanitity move in the same direction.
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Quantity supplied
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*the amouth of a good or service that a producer is willing and able to supply at a specific price.
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Supply Schedule
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*table showing quantities supplied at various prices.
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Supply Curve
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*upward sloping line that shows in graph form the quantities supplied at each possible price
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Determinants of Supply
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*things that can increase or decrease the supply and make the supply curve shift left or right.
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Price of Inputs
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*If the cost of the materials used in making the item decrease then more items can be produced at a lower cost and vice versa.
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What are the 4 deteriminants of Supply?
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1. price of inputs
2. number of firms in industry 3. taxes 4. technology |
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Number of firms in the industry
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*if the number of firms increases there will be a larger supply of goods which will shift the prices to the right on the supply curve
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taxes
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*if government increases the taxes, producers will have higher costs and will cause the supply curve to shift to the left.
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technology
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*improvements in technology allow suppliers to produce items at a lower cost which will cause the demand curve to shift right
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Law of Diminishing Returns
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*rule states that as more units of a factor of production are added to other factors of production, at some point total output coninues to increase out at a diminishing rate.
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Equlilbrium price
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*price at which the amount producers are will to supply = the amount consumers will pay.
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Change in demand or supply
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*will shift the curve and result in a new equilibrium price and quantity.
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Price is a signal
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*Changing prices tell producers to change production and consumers to change spending habits.
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Shortage
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*quantity demanded is greater than the quantity supplied at the current price.
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Surplus
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*quantity supplied is greater than the quantity demanded at the current price.
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Market forces
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*prices rise and fall and eliminate shortages or surpluses as long as it is unregulated by government.
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Price controls
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*government sometimes sets prices
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Price Ceiling
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*maximum price that can be charged.
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Black markets
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*underground or illegal market in which goods are traded.
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Price floors
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*legal minimum price which a good or service may not be sold.
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