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Economics: Supply And Demand, Bruce Supply and Demand
A study guide for Mrs. King's economics test on supply and demand...
Terms in this set (54)
Combination of desire, ability, and willingness to buy a product.
Amount demanded at any given price.
Graph showing the quantity demanded at each and every possible price that might prevail in the market at any give time.
Law of Demand
Rule stating that more will be demanded at lower prices and less at higher prices, inverse relationship between price and quantity demanded.
Satisfaction or usefulness obtained from acquiring one more unit of a product.
Law of Diminishing Marginal Utility
Extra usefulness or additional satisfaction persona gets from acquiring or using one more unit of a product...the satisfaction you get.
Elasticity of Demand
Measure of the way in which the quantity demanded responds to the change in price.
Amount of product offered for sale at all possible prices in a market.
Amount that producers bring to the market at at any given price.
Graph showing the quantities supplied at each and every possible price in the marker.
Law of Supply
Principle that more will be offered for sale at higher and prices and less at lower prices.
Elasticity of Supply
Measure of the way in which the quantity supplied responds to a change in price.
Cost of Production
Amount of money, resources, raw materials, labor, and production it takes to make a good, item, or service.
Costs of production that don't change when the output changes.
Production costs that vary as the output changes (labor, energy, raw materials).
Variable plus fixed costs, all costs associated with production.
Law of Supply and Demand
Supply of good and service increase when demand is great (and prices are high) and will fall when demand is low (and prices are low).
Price where the quantity supplied equals the quantity demanded, price that clears the market.
Situation where quantity supplied is greater than quantity demanded at a given price.
Situation where quantity supplied is less than quantity demanded at a given price.
Maximum legal price that can be charged for a product.
Lowest legal price that can be paid for a good or service.
income, tastes, substitutes, complements, expectations, number of consumers
6 Factors That Affect Demand
Changes in price cause a LARGE change in quantity demanded.
Changes in price cause a SMALL change in quantity demanded.
Necessity, substituitability, income
3 Factors Affecting Elasticity of Demand
Ability to adjust
1 Factor Affecting Elasticity of Supply
Cost of resources, productivity, technology, taxes, expectations, regulations, sellers
7 factors that will cause a change in supply
Supply goes up and curves goes _____.
Supply goes down and curves goes _____.
Shortage is on ______ side of demand curve.
Surplus is on ______ side of demand curve.
Demand has an _________ _________ with price and demand.
upper left, lower right
Demand curve moves from ______ _____ to ________ _____.
Law of Demand: Price goes ______, demand goes ______.
Real Income Effect
Individuals cannot keep buying the same quantity of a product if its price rises while their income stays the same.
If a product can be substituted, the higher price product's demand goes _____ while the lower price product's demand goes _____.
If a product is related, the higher price product's demand goes _____ and the complement product's demand goes _____.
Demand: shift right=______ in demand.
Demand: shift left=______ in demand.
Law of supply: suppliers will offer more for sale at _____ prices and less for sale at _____ prices.
Labor is a _______ cost.
When products are first introduced, their price is ____ and their demand is ____.
Extra revenue from the production of one additional unit.
Decision making based on extra benefit/cost of an action.
Prices seek own equilibrium in a _______ _______.
Define elastic demand
When the quantity demanded changes more than the price does.
Define inelastic demand
when the quantity demanded by buyers doesn't change as much as the price does.
Define diminishing marginal utility
we are only willing to pay full price for a certain quantity of a product
Explain how diminishing marginal utility affects our willingness to pay for goods
Once you have paid or bought the food once your willingness to buy it goes down.
the total quantity of goods and servives that buyers are willing to buy at all given prices
the total quantity of goods and services that sellers are willing to sell at all given prices
Explain the Law of Supply
states that as prices go up, the quantity of goods supplied goes up.
List the determinants of supply
Change in production, technology, profit opportunities, price expectations, number of sellers
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