Term
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Definition
| (inverse relationship) price up --> demand down |
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Term
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Definition
| people have a fixed income and as price changes, people must make changes to afford products based on their income |
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Term
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Definition
| when people realize their fixed income doesn't allow them to buy certain things, they look for substitutes |
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Term
| diminishing marginal utility |
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Definition
| each successive unit has less marginal utility |
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Term
| Nonprice Demand Determinants (things that can change demand) |
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Definition
-change in income (income up --> demand up)
-change in consumers (population shift)
-tastes/preferences
-price of related goods (substitutes/complements)
-future expectations |
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Term
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Definition
(direct relationship)
price up --> quantity supplied up |
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Term
| nonprice supply determinants |
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Definition
-cost/availability of resources (more availability --> line shifts right. min wag increase --> shifts left)
-change in # of producers
-technology
-government intervention (taxes, regulations, and subsidies which shifts right)
-future expectations |
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Term
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Definition
| if NO government intervention, suppliers/demanders will find an equilibrium |
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Term
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Definition
price is ABOVE equilibrium --> price drops to get rid of surplus
Qd down/ Qs up --> Qd less than Qs |
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Term
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Definition
price is below equilibrium --> price increases since there's less things (rare)
Qd up / Qs down --> Qd greater than Qs |
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Term
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Definition
| price floors/price ceilings |
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Term
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Definition
leads to SURPLUS
set price floor is ABOVE equilibrium (prices can't be lower than set price)
Price up --> Qd down --> Qs up |
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Term
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Definition
leads to SHORTAGE
set price ceiling is BELOW equilibrium
(prices can't be higher than set price)
price down --> Qd up --> Qs down |
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Term
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Definition
can only be supplied a certain amount
(typically crops/agricultural products) |
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Term
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Definition
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Term
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Definition
| leads to price down and Q as indeterminant |
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Term
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Definition
| leads to price as indeterminant and quantity up |
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Term
| demand down and supply down |
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Definition
| leads to price as indeterminant and quantity down |
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Term
| demand up and supply down |
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Definition
| leads to price up and quantity as indeterminant |
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Term
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Definition
products people can buy with good income
(income up --> demand up) |
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Term
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Definition
things people have to buy due to low income
(income up --> demand down) |
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Term
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Definition
| percent of change in price is greater than the percent of change in quantity demanded |
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Term
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Definition
| percent of change in price is less than the percent of change in quantity demanded |
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Term
| inelastic characteristics |
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Definition
| -necessity -not many other options -small part of budget |
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Term
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Definition
-luxury goods
-many other options
-larger part of budget |
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Term
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Definition
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Term
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Definition
-price up --> Qd down but because Qd is smaller anyway --> TR up
-price down --> Qd up but because Qd is smaller anyway --> TR down
(DIRECT relationship) |
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Term
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Definition
| -price up --> Qd down but because Qd is bigger anyway --> TR down -price down --> Qd up but because Qd is bigger anyway --> TR up (INVERSE relationship) |
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Term
| elasticity of demand coefficient |
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Definition
[image]
Ed = 1 --> unit elastic
Ed less than 1 --> inelastic demand
Ed greater than 1 --> elastic demand |
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Term
| elasticity of supply coefficient |
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Definition
(same thing as demand formula but for quantity supplied)
Es = 1 --> unit elastic
Es greater than 1 --> supply elastic
Es less than 1 --> supply inelastic |
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Term
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Definition
| one of the FOPs is fixed (steeper slope) |
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Term
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Definition
none of the FOPs are fixed
(shallower slope) |
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Term
| perfectly inelastic slope |
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Definition
| either demand curve or supply curve is vertical |
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Term
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Definition
| either demand curve or supply curve is horizontal |
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