Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
21 Cards in this Set
- Front
- Back
|
Demand shows what in terms of consumers?
|
Their willingness and ability to purchase a product at each possible price level during a spicified period of time
|
|
|
If specific time (like 'per week' is not stated?
|
Cannot tell whether demand for product is large or small
|
|
|
Law of Demand States (see graph)
|
As price level falls, Quantity Demanded Increases and Vice Versa if price level rises
|
|
|
Law of diminishing marginal utility states?
|
Buyer of product will derive less utility from each successive unit of the product consumed
|
|
|
Income effect?
|
Lower price increases Purchasing power of buyer's money income.
Vice Versa with higher price |
|
|
Substitution effect?
|
At lower price, buyers have incentive to substitute less expensive product for similar products that are more expensive.
|
|
|
What are the 5 determinants of demand?
|
Tastes (Preferences)
Expectations Prices of Related Goods Number of Buyers Income |
|
|
Normal Goods?
|
"Superior Goods" whose demand varies DIRECTLY with money income. (i.e electronic equipment)
|
|
|
Inferior Goods?
|
Goods whose demand varies INDIRECTLY with money income. (i.e Used clothing)
|
|
|
Substitute Good?
|
When two products are substitutes, the price of one and demand for other move in same direction.
|
|
|
Complementary Good?
|
When two products are complementary, the price of one and demand for other move INVERSELY.
|
|
|
Unrelated Goods =?
|
Independent Goods
|
|
|
Change in Demand
Change in Quantity Demanded |
Shift in entire curve; caused by 5 determinants
Movement along curve; caused by movements in price level |
|
|
Supply shows what in terms of producers?
|
Their willingness and ability to make a product at each possible price level during a spicified period of time
|
|
|
Law of Supply states?
|
As price level rises, the quantity supplied rises.
As price level drops, the quantity supplied drops. |
|
|
What is 'Price level' to a supplier?
|
Price equals REVENUE, which means when price rises, so will revenue if increase supply.
|
|
|
What are the 6 determinants of supply?
|
Resource Prices
Technology Taxes and Subsidies Prices of Other Goods Price Expectations Number of Sellers |
|
|
Rationing Function of Prices?
|
Ability of competitive forces of supply and demand to always produce a point of equilibrium quanity and price
|
|
|
Price Ceiling?
|
Maximum legal price a seller may charge for a product or service
|
|
|
Price Floor
|
Minimum Price Fixed by government.
|
|
|
Government-controlled Prices in form of ceilings and floors do what 3 things?
|
1) Distort Resource Allocations
2) Stifle Rationing Function of Prices 3) Cause Negative Side Effects |
