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Microeconomics Until 2
Terms in this set (38)
Excess demand, demand exceeds supply
Excess supply, supply exceeds demand
A graphical representation of a supply schedule.
Law of Demand
Price and demand have an inverse relationship. As price goes up, demand goes down and as price goes down, supply goes up.
Law of Supply
Price and Supply have a direct relationship. Price goes up, supply goes up, and as price goes down, supply goes down.
Change in Quantity Supplied
Movement on a single supply curve because of a change in price.
Change in Supply
Shows a shift in the supply curve. Represented by 2 curves.
Elastic Demand or Supply
Demand or supply has a lot of change when price changes.
Inelastic Demand or Supply
Demand or supply has little change when price changes.
How much supply or demand reacts to a change in price.
The government sets a maximum price at which a good can be sold. Typically this price is lower than equilibrium and cause a shortage. Ex. NY rent control
The government set a minimum price for how much a product can be sold for. Typically then price higher than equilibrium and cause a surplus. Ex. Minimum wage
The government sometimes view the equilibrium price as to high or low so they have either price floors or price ceilings as a result.
Serves as a signal for buyers to buy when price is low and for suppliers to supply more when the price is high.
Good that can be used in place of the other change in demand for one has the opposite effect on the other. Ex. Show skis and snow boards
Goods that go together. Change in the demand for one has the same effect for the other. Ex. Peanut Butter and Jelly
Unit of Account
A means for comparing the value of goods and services.
Store of Value
Something that keeps its value if it is stored rather than used.
Medium of Exchange
Means for facilitating transactions.
Anything that is a medium exchange, has a store of value, and is a unit of account.
Studies the interaction of people and businesses (or firms) within a single market.
Point where quantity supplied and quantity demanded are the same. Also called Market Clearing Price.
Factors Causing a Shift in Supply
Producer price expectations. Profit motive. Input Costs. Number of Producers. Technological Improvements.
Graphical representation of a demand schedule.
Causes for Shift in Demand
Price Expectations of consumers. Price of related goods (compliments and substitutes). Income change. Number of consumers. Consumers taste and preferences.
Change in Quantity Demand
Movement along a single demand curve by a change in price.
Change in Demand
Shows a shift in the demand curve. -represented by 2 curves.
There are 3 types of business organizations:
There are 4 basic market structures:
-pure (perfect) competition
Pure (perfect) Competition
Market Structure where there are many buyers and sellers selling identical products. Ex. Farm products
Market structure where a few businesses dominate the market. Ex. Direct/ Dish
Market Structure dominates by a single business. Ex. Standard Oil, Demorest Water, Windstream
When the market runs more efficiently by having one business control the market. Ex. public utilities
Barrier to Entry
How Difficult it is to get into a market.
Market structure where there are many buyers and sellers selling similar products that can be differentiated by brand. Ex. Nike, Hibbits, Adidas
Business owned by shareholders (stock holders)
Business owned by two or more people.
Business owned by only 1 person.
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