Section 2

Front 1

demand

Back 1

desire to own something and ability to pay for it

Front 2

law of demand

Back 2

when price decreases, demand increases

Front 3

demand schedule

Back 3

table listing qty purchased at each price

Front 4

normal goods

Back 4

things consumers demand more of when their income increases

Front 5

inferior goods

Back 5

things consumers demand less of when their income increases

Front 6

substitute goods

Back 6

goods that can be used in place of each other

Front 7

complimentary goods

Back 7

goods bought/used together

Front 8

substitution effect

Back 8

ability to substitute one inexpensive good for a similar inexpensive one

Front 9

income effect

Back 9

limited budget affects ability to purchase

Front 10

ceribus paribus

Back 10

all other things held constant

Front 11

Determinants of demand

Back 11

income-consumers ability to purchase goods,

population-number of buyers in the market,

consumer expectation-what buyers expect in a product,

tastes/trends- popularity of a good,

price of related goods-available substitutes at lower prices

Front 12

elastic

Back 12

changing demand with price

Front 13

inelastic

Back 13

demand doesn’t change with price

Front 14

unitary elastic

Back 14

change in price = change in demand

Front 15

supply

Back 15

amount of goods available

Front 16

law of supply

Back 16

when price increases, production increases

Front 17

supply schedule

Back 17

table listing qty of a good listed at each price

Front 18

short run

Back 18

usually inelastic because supply level is hard to change

Front 19

long run

Back 19

supply is elastic because supply methods can evolve

Front 20

subsidies

Back 20

govt payment that supports business/market

Front 21

price floors

Back 21

min price

Front 22

price ceilings:

Back 22

max price

Front 23

excise taxes

Back 23

tax on production/ sale of a good

Front 24

Determinents of supply

Back 24

number of producers- how many competitors are in the market,

price of other goods-how much substitute goods cost,

cost of economic resources-cost to supply materials,

technology-ability to produce more efficiently,

expectations-future prices consumers expect in market,

supply shock- unexpected even causes sudden loss

govt inter action

Front 25

total cost

Back 25

fixed costs(static) + variable costs(dynamic)

Front 26

marginal cost

Back 26

cost of each additional unit.

Front 27

marginal utility

Back 27

added usefulness. Only useful for some people. (glasses, etc)

Front 28

diminishing marginal utility

Back 28

the more consumers consume, the less satisfied they become

Front 29

change in aggregate demand

Back 29

change in whole market at all prices

Front 30

change in quantity demand

Back 30

change in market at just one price (ceribus peribus)

Front 31

supply

Back 31

amount of goods available

Front 32

law of supply

Back 32

as price increases, supply increases

Front 33

quantity supplied

Back 33

amount a supplier is willing and able to supply at a certain price

Front 34

supply schedule

Back 34

how much of a good will be supplied at diff prices

Front 35

variable

Back 35

factor that can change

Front 36

marginal product of labor

Back 36

change in output from hiring an additional unit of labor

Front 37

increasing marginal returns

Back 37

level of production where marginal product of labor increases as number of workers increases

Front 38

decreasing marginal returns

Back 38

marginal product of labor decreases as number of workers increases

Front 39

operating cost

Back 39

cost of operating a facility

Front 40

law of variable proportions

Back 40

input will always change output

Front 41

equilibrium

Back 41

qty demanded = qty supplied

Front 42

rationing

Back 42

allocating scarce goods using criteria other than price

Front 43

black market

Back 43

market where goods are illegally sold

Front 44

spillover costs

Back 44

costs of production that affect ppl who have no control over how much of a good is produced

Front 45

barrier to entry

Back 45

factor that makes it difficult for a new firm to enter a market

Front 46

start-up costs

Back 46

expenses firm must pay before producing/selling goods

Front 47

economies of scale

Back 47

factors that cause a producer’s average cost of unit to fall as output rises

Front 48

rent control

Back 48

price ceiling on rent

Front 49

search costs

Back 49

financial/opportunity costs consumers pay when searching for a good

Front 50

merger

Back 50

2 or more companies combine

Front 51

commodity

Back 51

products considered the same regardless of producer

Front 52

natural monopoly

Back 52

market runs most efficiently when one large firm supplies all the output.

Front 53

Franchise

Back 53

right to sell a good or service within an exclusive market

Front 54

licensee

Back 54

govt issued right to operate a business

Front 55

price discrimination

Back 55

division of customers into groups based on how much they will pay for a good

Front 56

price war

Back 56

competitors cut prices to win business

Front 57

predatory pricing

Back 57

selling a product below cost to drive out competitors

Front 58

price fixing

Back 58

agreement among firms to charge one price for the same good

Front 59

collusion

Back 59

agreement among firms to divide the market, set prices, or limit production (illegal)

Front 60

cartels

Back 60

formal organization of producers that agree to coordinate prices and production