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Econ Chapter 5 & 6
Terms in this set (82)
What two characteristics must be met for a consumer to make a purchase?
Willing and able to make the purchase
Amount of good or service that consumers are willing and able to buy at a specific price
Why is quantity demanded and demand different?
Demand is the quantities demanded at all various prices at which a good is sold added together
Amount of a good or service tang consumers are willing and able to buy at all prices in a given period.
List of quantities of a good that one person will but at various prices.
What does demand curve show?
How price influences the quantity demanded
What else does the demand curve show?
As the price changes, quantity demanded moves up or down the demand curve
What does the horizontal axis ALWAYS show in a a demand curve?
Which way does the demand curve go?
Down to the right
All of the individual quantities demanded in a market
Why is knowing market demand critical for business?
Tells them how many goods all consumers will buy at various prices
If we added all of our quantities demanded for pizza in this class would we know the quantity demanded?
As price in increase increases, quantity demanded decreases: move in opposite directions
Law of demand
What are the 3 factors that affect consumer spending?
- law of diminishing marginal utility
Why does lofdu relate to demand?
As the quantity of a good or consumed increases, the marginal utility of each additional unit decreases
Why else does lofdu relate to demand?
Consumers have to make decision not only of they should buy but also how much they should buy
Where will consumers buy large quantities?
When the price is right
If the price or a good or service increases, they will not be able to buy the same quantity as they did at original price
When 2 goods can satisfy the same want
Example of substitute goods?
Coke and Pepsi
What is the only thing that causes a change in quantity demanded?
How is quantity demanded said to move?
Along the demand curve
-Changes in income
-Changes in number of buyers/consumers
-Change in taste and preferences
-Changes in expectations
-Availability/price of substitute goods
- availability of complementary goods
-change in weather or season
Does a change in price result in movement along the demand or supply curve?
Does the quantity demanded show the various amounts consumers will consume at different prices?
Because pb and jelly are comp goods, when the price of pb goes up, the demand for jelly goes down.
A substitute good for Starbucks is Kirkland Brand Coffee, and when the prices of Starbucks goes up, the demand for Kirkland decreases.
Quantity demanded doesn't really respond to a change in price
What's an example of an Inelastic good?
A product that's consumed along with some other product
The amount of a good or service that producers are willing an sable to offer for sale at all prices in a given period
A table that shows the quantities supplied at different prices in a market
All of the individual quantities supplied
Why does the supply curve slope positively to the right?
As the price rises, the quantity supplied rises
Why did the demand curve slope negatively to the right?
As the price rises, the quantity demanded by consumers will fall
The amount of a good or service that producers are willing and able to offer for sale at a specific price
Cash payment aimed at helping a producer to continue to operate
What two conditions must producers meet for there to be a supply of a product?
Price and cost of ingredients
Measure of the sensitivity of consumers to a change in price
Elasticity of demand
Why is price not a shifter?
It can only lead to movement along the line
What does the graph of an elastic good look like?
What does the graph of an inelastic good look like?
More up and down
A measure of sensitivity of producers to a change in price
Elasticity of supply
As the optic rid a good or service increases, the quantity supplied decreases.
Law of supply
Amount of money of a firm receives in the course of doing business
Tax on the manufacture or sale of a good.
What dos excise tax add to and cause?
Adds to the production of every unit produced, thereby causing supply to decrease.
What is the demand elasticity equation?
%change in quantity demanded/%change in price
What is a demand schedule used to determine?
Consumers' willingness and ability to buy
What moves along the demand curve?
What is a supply schedule used to determine?
A producer's willingness and ability to sell
A change in demand causes what to shift?
The point at which the quantity of a product demanded by consumers in a market equals the quantity supplied by producers
Buyers and sellers agree at...?
The price marked by equilibrium point on the supply and demand graph
What is the equilibrium price also known as?
Market clearing price
The quantity marked by the equilibrium point on the same graph
Why do prices move ?
To bring markets into balance
The price a willing consumer pays to a willing producer for sale of a good or service
When the quantity demanded is not equal to the quantity supplied
What happens when the price is too low?
When the quantity demanded at a specific price exceeds the quantity supplied
What happens when the price is too high?
When the quantity supplied at a specific price exceeds the quantity demanded
How long does it take for equilibrium happen?
Three Qs to ask about demand and supply
Does it affect on or both?
Does it shift one of the curves to the right or left?
What are the new equilibrium price and quantity hand how have they affected?
What are prices used for?
To convey info in order to make decisions for consumers and producers
What can prices create?
Incentives to work and produce
What do prices allow markets to do?
Respond to changing conditions
What's the most important role of price in a market based economy?
Guide resources to their most efficient uses
How does the govt. intervention affect markets?
Placing limits on high or low certain prices may be called price controls
A min price consumers are required to pay for a good or service
A government imposed legal floor on hourly wage rate, the price the market pays for labor
What do price floors lead to?
What do price ceilings lead to?
A max price consumers may be required to pay for a good or service.
What makes it illegal to charge more than than specified monthly amount for rental housing
The controlled distribution of a limited supply of a good or service
What can be the results of excess supply and demand
Rationing and black markets
An illegal marker in which goods are traded at prices or in quantities higher than those set by law
Excess demand leads to...?
Excess supply leads to...?
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