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18 Cards in this Set

  • Front
  • Back
Factors other than the price of a good that can affect purchases include:
tastes and preferences, income, number of buyers, price of related goods, and expectations
The ________ unit of a thing is the last bit of that thing.
marginal
What is marginalism?
The idea that rational decisions are based on assessments of the costs and benefits of the final increments of an activity.
The law of demand states that consumers will purchase ______ of a good the lower its opportunity cost (relative price), and vice versa. The basic reason for this is the ______ effect, which reflects adjustments people make solely because of changes in relative prices. A secondary reason for most goods is the ________ effect, which measures the adjustments people make because price changes alter consumers' _________.
more; substitution; income; purchasing power
The law of supply states that higher prices induce sellers to offer consumers _________ of their product, and vice versa. The supply curve depicts the
more; maximum
Markets permit buyers and sellers to communicate their desires and complete transactions. In doing so, markets reach...
equilibrium
When quantity demanded exceeds quantity supplied, the current price is too low and a _______ exists. This is known as a _______ market.
shortage; sellers
If current price of a good is above the equilibrium price, there is a _______ of the good, which is known as a _______ market.
surplus; buyers
supply price
minimum payment required that will induce a bit more production
ceteris paribus
"All other influences being held constant"
market price
must be in accord with consumers' subjective evaluations before they will purchase a good
complementary goods
generate more consumer satisfaction if consumed together. Increases in the price of a good tend to reduce demands for its complements and vice versa
e.g. salt and pepper
substitutes
goods increasingly purchased in place of the item in question when its price rises, and vice versa
e.g. coffee and tea
demand price
a consumer's subjective value from having a bit more of a good
substitution effect
adjustments people make soley because relative prices change
income effect
people's adjustments when price changes alter purchasing power
What would be the effect on a demand curve when the price of substitute changes?
change in demand -- curve shifts
law of supply
quantities supplied are positively related to price