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20 Cards in this Set
- Front
- Back
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OPPORTUNITY COST
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THE MOST DESIRED GOODS OR SERVICES THAT ARE FORGONE TO OBTAIN SOMETHING ELSE
-EX: TAKING OFF WORK TO STUDY FOR FINALS. (POSSIBILITY OF GETTING A GOOD GRADE INCREASES, WHILE IT PREVENTS YOU FROM MAKING MONEY THAT DAY) |
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PRODUCTION POSSIBILITY
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COMBOS OF GOODS/SERVICES THAT COULD BE PRODUCED INA GIVEN TIME PERIOD WITH ALL AVAILABLE RESOURCES AND TECHNOLOGY
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THE LAW OF OPPORTUNITY COST
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WITH RESPECT TO SCARE RESOURCES:
PRODUCING MORE OF ONE GOOD IMPLIES PRODUCING LESS OF ANOTHER |
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MARKET MECHANISM
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THE USE OF MARKET PRICES AND SALES TO SIGNAL DESIRED OUTPUTS
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EXAMPLES OF "INVISIBLE HAND"
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SHOWROOMS, BROWSING THE INTERNET, SHOWING INTEREST
ALL INFLUENCE PRODUCTION POSSIBILITIES/NUMBERS WITHOUT A SINGLE TRANSACTION NEEDING TO BE MADE |
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THE LAW OF DEMAND
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THE QUANTITY OF A GOOD DEMANDED IN A GIVEN TIME PERIOD INCREASES AS IT'S PRICE FALLS
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DETERMINANTS OF MARKET DEMAND
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1. TASTE
2. INCOME 3. OTHER GOODS 4. EXPECTATIONS 5. NUMBER OF BUYERS |
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THE LAW OF SUPPLY
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THE QUANTITY OF A GOOD SUPPLIED IN, A GIVEN TIME PERIOD, INCREASES AS ITS PRICE INCREASES
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DETERMINANTS OF CONSUMER DEMAND
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1. TASTES
2. INCOME 3. EXPECTATIONS 4. OTHER GOODS |
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DETERMINANTS OF MARKET SUPPLY
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1. TECH
2. FACTOR COSTS 3. OTHER GOODS 4. TAXES AND SUBSIDIES 5. EXPECTATIONS 6. NUMBER OF SELLERS |
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MARGINAL UTILITY
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THE CHANGE IN TOTAL UTILITY OBTAINED BY CONSUMING 1 ADDITIONAL (MARGINAL) UNT OF A GOOD OR SERVICE
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LAW OF DIMINISHING MARGINAL UTILITY
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EX: EATING A ROLL OF SUSHI WITH A SAKI-BOMB
WONDERFUL. EATING YOUR 6TH ROLL OF SUSHI AND 9TH SAKI-BOMB. DISGUSTING. |
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PRICE ELASTICITY OF DEMAND
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THE % CHANGE IN QUANTITY DEMANDED
DIVIDED BY THE % CHANGE IN PRICE P = ^D E -------- ^P |
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ELASTIC DEMAND
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TYPE OF DEMAND THAT WILL RISE OR FALL DEPENDING ON THE PRICE OF THE GOOD.
For example, candy bars are an elastic demand. If the price of candy is around $1, most people will buy the candy and it will be high in demand. However, if that same candy bar's price rose up to $4, most people would not buy the candy. |
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INELASTIC DEMAND
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OPPOSITE OF ELASTIC. PEOPLE WILL BUY GOODS WITH AN INELASTIC DEMAND NO MATTER A PRICE CHANGE.
EX: GAS, MEDICATIONS, ETC. AMOUNT BOUGHT MAY DECREASE, BUT SALES WILL NOT DISCONTINUE DUE TO ITS NECESSITY. |
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DETERMINANTS OF PRICE ELASTICITY OF DEMAND
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1. NECESSITIES VS. LUXURIES
2. AVAILABILITY OF SUBS. 3. TIME 4. INCOME |
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PRICE ELASTICITY AND TOTAL REVENUE
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TOTAL REV = PRICE x QUANTITY SOLD
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NORMAL VS. INFERIOR GOODS
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NORMAL: GOOD FOR WHICH DEMAND INCREASES WHEN INCOME RISES
INFERIOR: GOOD FOR WHICH DEMAND DECREASES WHEN INCOME RISES |
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FOR INFERIOR GOODS...
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THE INCOME ELASTICITY OF DEMAND IS NEGATIVE
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FOR NORMAL GOODS...
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THE INCOME ELASTICITY OF DEMAND IS POSITIVE
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