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37 Cards in this Set
- Front
- Back
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MOdern economics involves
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supply,demand,equilibrium
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market
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group of buyers and sellers for a particular good/service
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Competitive market includes:
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many buyers and sellers,not controlled by one person, narrow range of prices
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perfect competition
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Products are the same,numerous buyers and sellers,Buyers and sellers are price takers
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oligopoly
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few sellers, not always agressive competition
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monopolisitc competition
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many sellers,slightly differed prodcuts, each seller sets their own price
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Law of demand
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their is an inverse relationship betwenn price and quantity demanded
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Determinants of demand
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market price, income, prices of related goods, tastes expectations
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Demand curve
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Downward sloping
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Market demand
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All individuals demands for good or service
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quanitity demanded changed by:
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change in price
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demand changed by
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determinant other than price
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As income increases a demand for a normal good will:
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increase
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AS income increases the demand for an inferior goods:
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Decreases
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substitutes
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fall in the price of one good causes the change in demand for another
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fall in price of one good increases the demand for another
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complements
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determinants of supply
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marketprice, input prices, tech, expectations, number of producers
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excess supply creates
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surplus
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excess demand creates
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shortage
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supply reduces move to the
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Left
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demand increases move to the
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right
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elasticity
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how much buyers and sleers respond to changes in market conditions
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price elasticity of demand
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percentage change in quanitity demanded given a percentage change in price
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determinants of price elasticity of demand
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nessecities vs luxuries, availbility of substitutes, definition of the market, time
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demand is more elastic:
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the good is a luxury, the longer the time period, larger number of substitutes, the more narrowly defined the market is
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equation for pr. elasticity of demand
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quant. demanded divided by the percentage in price change
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inelastic demand..
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quant. demanded does not respond strongly to price changes, price elasc. is less than 1
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elastic demand...
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responds strongly.. elas is more then 1
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perfectly inelastic
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quant. demanded does not respond to price changes (vertically graphed)
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perfectly elastic
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quant. demanded changes infinitely with any change in price (horizontally graphed)E=infinity
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unit elastic
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quant demanded changes byt the percentage change in price (curved graph) E=1
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total revenue equation
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Price X Quant.
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income elas. of demand
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Percentage change in quant. demanded/ percentage change in income
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income elasticity types of goods
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normal, inferior
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Income inelastic
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goods consumers regard as necessities
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income elastic
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goods that are luxuries
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price elasticity of supply
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same as demand but with supply
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