Term
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Definition
| All the quantities that consumers are willing and able to buy at different prices in a period of times. |
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Term
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Definition
- When price rises, quantity demanded falls
• Ceteris Paribus
- When price Falls, Quantity demanded rises. |
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Term
| Diminishing marginal utility |
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Definition
satisfied less and less with each additional purchase.
a. Ex. Starving boy eats one slice of pizza at a time…. |
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Term
| Consumer tastes/preferences demand determinant |
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Definition
1. Income
2. Tastes/Preferences
3. Consumer Expectations
4. Market Size/ # Buyers
5. Complementary Goods
6. Substitute Goods |
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Term
| Market size (# buyers) demand determinant |
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Definition
If # of buyers increases, then the Demand Increases
If # of Buyers decreases, then the Demand Decreases |
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Term
| Income demand determinant (normal & inferior) |
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Definition
Normal Goods:
When income rises, demand increases
When income falls, demand decreases
Inferior Good:
When income rises, demand decreases
When Income falls, Demand increases |
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Term
| Related goods demand determinant (subs & comps) |
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Definition
PB & J:
If Price of one rises, demand for the other decreases
If price of one falls, the demand for the other increases
Coke and Pepsi:
If price of one rises, demand for other increases.
If price of on falls, demand for other decreases. |
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Term
| Consumer expectations demand determinant |
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Definition
If future price is expected to rise, current, demand increases.
If the future price is expected to fall, current demand decreases. |
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Term
| Difference between demand & quantity demanded |
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Definition
| quantity is directly effected by the price while regular is effected by factors listed. |
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Term
| Elasticity of demand (definition & formulas) |
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Definition
a. Responsiveness by consumers
b. It measures the % change in quantity demanded that results from a % change in price |
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Term
| Difference between elastic and inelastic |
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Definition
| if there is little/no response to price change PED is said to be inelastic… If there’s a large response to price change, PED is said to be elastic. |
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Term
| Perfectly elastic demand (def., graph, infinite) |
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Definition
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Term
| Relatively elastic demand (def., graph, >1) |
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Definition
| gradual decrease in price and increase in quantity |
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Term
| Perfectly inelastic demand (def., graph, = 0) |
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Definition
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Term
| Relatively inelastic demand (def., graph, <1 but >0) |
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Definition
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Term
| Unit elastic (definition) |
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Definition
| any change in price, whether big or small, triggers exactly the same percentage change in quantity. |
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Term
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Definition
• Total revenue is the amount of money received by the seller
• It is equal to the price of the good X the quantity sold
o TR = P X Q |
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Term
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Definition
i. Number of substitute
ii. Luxury of necessity
iii. Narrowness of definition
iv. Time
v. Proportion of income spent |
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Term
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Definition
| All the quantities that producers are willing and able to provide at different prices in a period of time. |
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Term
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Definition
As prices fall…quantity supplied falls
As prices rise… quantity supplied rises….
*A Direct Relationship* |
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Term
| Input cost supply determinant |
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Definition
1. Input Costs
2. Labor Productivity
3. Technology
4. Government Action
5. Producer Expectations
6. Number of Producers |
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Term
| Government action supply determinant |
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Definition
a. If taxes increase, supply decreases (excise taxes)
b. With a subsidy (reverse tax), supply increases |
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Term
| Technology supply determinant |
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Definition
| a. Technology increases supply |
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Term
| Labor Productivity supply determinant |
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Definition
| a. Increasing productivity increases supply |
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Term
| # Producers supply determinant |
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Definition
a. # of sellers rise, supply increases
b. # of sellers fall, supply decreases |
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Term
| Producer expectations supply determinant |
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Definition
a. If the future price is expected to fall, increase current supply
b. If the future price is expected to rise, decrease current supply |
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Term
| Difference between supply & quantity supplied |
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Definition
| quantity is directly effected by the price while regular is effected by factors listed. |
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Term
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Definition
| when quantity demand and supply are equal |
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Term
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Definition
| too much supply, not enough demand |
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Term
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Definition
| not enough supply, too much demand. |
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Term
| Price Floor (def, graph, examples) |
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Definition
| Minimum legal, price helps producers…ex. Agriculture) |
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Term
| Minimum Wage (def, graph, effects of) |
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Definition
| Increases floor of wage and increases unemployment.... |
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Term
| Price ceiling (def, graph, examples) |
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Definition
| Max Legal Price, helps consumer… ex. Rent controls, WWII) |
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Term
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Definition
| o During WWII, Gov. dealt with shortage with rationing system |
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Term
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Definition
Selling a product at an illegal price
• Good intentions with bad consequences |
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Term
| What happens to eq p/q if demand increases? |
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Definition
| shift to right…. Equilibrium Price Increases and Equilibrium Quantity Increases |
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Term
| What happens to eq p/q if demand decreases? |
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Definition
| Equilibrium Price Decreases and Equilibrium Quantity Decreases |
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Term
| What happens to eq p/q if supply increases? |
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Definition
| Eq. P Decreases and Eq. Q Increases |
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Term
| What happens to eq p/q if supply decreases? |
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Definition
| Eq. P Increases and Eq. Q Decreases |
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Term
| Positive statements/Economics |
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Definition
| A way of describing and explaining economics as it is |
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Term
| Normative Statements/Economics |
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Definition
| A way of describing and explaining what economics behavior ought to be, not what it actually is. |
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Term
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Definition
| a situation that exists when there are not enough resources to meet human wants. |
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Term
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Definition
| the study of how individuals and societies satisfy their unlimited wants with limited resources. |
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Term
| Resources/Factors of Production |
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Definition
| the economic resources needed to produce goods and services |
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Term
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Definition
| the value of something that is given up by choosing one alternative over another |
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Term
| Production Possibilities Curve |
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Definition
| a graph used to illustrate the impact of scarcity on an economy |
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Term
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Definition
| Goods and services that are provided by the government and consumed by the public as a group. |
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Term
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Definition
Negative: an externality that is a negative effect, or cost, for people who were not involved in the original economic activity. (2nd hand smoking)
Positive: people aren't involved but they benefit from it. (Neighbor has a beautiful garden/yard) |
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