13 terms

Ch 2 Demand and supply

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Components of the model of D&S
(D&S graph)
Characteristics of various markets
Pure competition has many firms and buyers, monopolistic competition many firms with non interdependent pricing and quantity many buyers, oligopoly few firms w/ interdependent pricing and quantity, pure monopoly single seller.
Market demand
a tabulation of the quantity customers are willing to buy at given price
Law of demand
The principle that an inverse relationship exists between the price of a good and the quantity of that good that buyers demand, other things being equal
Change in quantity demanded vs change in demand
change in quantity demanded is along the D line, change in demand is a movement of the D line
Market supply
An upward sloping curve dipicting the positive relationship between price and quantity supplied.
change in quantity supplied vs change in supply
Change in quantity supplied is a shift in the supply curve caused by a change in some condition other than goods price,
Market equilibium
A market state where the supply in the market is equal to the demand in the market. the equilibrium price is the price of a good or service when the supply of it is equal to the demand for it in the market
Demand shocks
A sudden surprise event that temporarily increases or decreases demand for goods and services.
Supply shocks
Sudden surprise event temporarily increasing or decreasing demand for goods and services.
Price Ceilings
A government-imposed price control or limit on how high a price is charged for a product.
price floors
A government or group imposed price control or limit on how low a price can be charged for a product. Must be higher than equilibrium price in order to be effective
minimum wage as an example of a price control
Legal minimum or maximum prices for specific goods or services as an attempt to manage the economy by direct intervention.