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33 Cards in this Set

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demand, quantity demanded
want or willingness of consumers to buy goods and services. quantity demanded is measured at a certain price over a certain period of time
extension of demand
way in which demand changes with a fall in price, with no other factors involved
contraction of demand
way in which demand changes with a rise in price, with no other factors involved.
utility
the satisfaction the consumer gains from a good
law of diminishing marginal utility
the more of a good the consumer has, the less utility the consumer will gain from each extra unit
ceteris paribus
all other things remaining unchanged
increase in demand (curve?)
consumers now demand more at each and every price than they did before, curve shifts outwards
causes for a shift in demand (7)
incomes
income taxes
population
prices of other goods
tastes and fashion
advertising
other factors like weather
inferior goods
when people's incomes rise, the demand for these more basic goods will fall
complementary goods, complements
goods and services consumers jointly demand and want together like bread and butter, or tea and sugar
substitutes
a purchase of one good can replace the want of another one like margarine and butter.
supply, quantity supplied
amount of a good or service firms or producers are willing to make and sell at a number of possible prices, quantity measured per period of time
market supply
supply of all the individual producers competing to supply the good or service
extension of supply
supply rises with the rise in price, ceteris paribus
contraction of supply
supply falls with a fall in price, ceteris paribus
increase in supply (curve change)
producers are now more willing and able to supply at each price than they were before, curve shifts outwards
fall in supply (curve change)
producers are now less willing and able to supply than they were before, curve shifts inwards
shifts in supply possible causes (5)
changes in prices of other commodities- producers would rather use their resources on a more profitable commodity

changes in the costs of factors of production

technical progress

other factors like weather

gov. influences
subsidies
an amount of money the gov. gives a company to make it produce more
market price, equilibrium price
price at which the supply and demand meet (2 terms)
disequilibrium
when demand doesn't equal supply
price elasticity of demand (and how they look on graphs)
the responsiveness of quantity demanded given a change in the price of a good or service.

elastic- flatter demand slope
inelastic- steeper slope
how to calculate price elasticity of demand
% change in quantity demanded divided by % change in price
how to tell if a product is price elastic or not
when Ed is greater than one
factors which affect price elasticity of demand (3)
# substitutes

period of time --> consumers will have a longer time to find a cheaper substitute

proportion of income --> salt, for example, doesn't cost much in the first place so it wouldn't affect people much if it doubled in price
perfectly price inelastic
if the rise and fall of the price causes no change whatsoever in the demand of the product
infinitely price elastic
a commodity is only demanded at one price and one price only.
unitary elasticity
a the percentage change in price will exactly equal the percent change in demand, resulting in the total amount spent will remain the same at every single price.
income elasticity of demand

inferior goods?
how much a change in incompe causes the quantity demanded of a good or service to change

% change in quantity demanded divided by % change in income

inferior goods will be negative
cross elasticity of demand (substitutes?) (complements?)
how much quantity demanded will rise or fall given a change in the price of another product

change in quantity of good X divided by change in price of good Y

substitutes: always positive
complements: always negative- a rise in the price of one will cause a fall in demand for the other as a result of the contraction of its own demand
price elasticity of supply and how graphs look
the responsiveness of quantity supplied to a change in price

inelastic: steep slope
elastic: gradual slope

% change in quantity supplied divided by change in price
factors that affect the price elasticity of supply
time- like transportation, more labor, the seasons, how much a store has in stock at that time, etc.

availability of resources - if more factors of production are actually available to use to expand
indirect taxes and how it affects the graph
the gov. places taxes on goods and services, reducing market price and quantity traded.

they cause supply curves to shift upwards.