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Markets - Micro
Terms in this set (28)
The amount of a good or service that consumers are willing and able to buy at various prices.
The amount of a good or service that consumers are willing and able to buy at each specific price
The degree to which a goods quantity demanded is effected by price
Determinant of Demand: Tastes and Preferences
Anything that causes a shift in tastes toward a good will increase demand for that good. Anything that causes a shift in tastes away from a good will decrease demand for that good.
Determinant of Demand: # of buyers
increase in # of buyers = increase in demand
decrease in # of buyers = decrease in demand
Determinant of Demand: Price of Related Goods - Substitutes
Substitutes are goods used in place of one another.
If the price of one increases, the demand for the other will increase (or vice versa)
Determinant of Demand: Price of Related Goods - Complements
Complements are two goods that are bought and used together.
If the price of one increase, the demand for the other will fall. (or vice versa)
Determinant of Demand: Income - Normal Goods
As income increases, demand increases
As income falls, demand falls
Determinant of Demand: Income - Inferior Goods
As income increases, demand falls
As income falls, demand increases
Determinant of Demand: Future Expectations
Expectations affect consumers' buying decisions.
deals with behavior and decision making by small units, such as individuals and firms.
the different quantities of a good that sellers are willing and able to sell (produce) at different prices.
quantity supplied (QS)
the amount of a good or service that the producer (supplier) is willing and able to supply at a specific price
Determinant of Supply - Prices/Availability of inputs (resources)
A decrease in input prices makes production more profitable at each output price, so firms supply a larger quantity at each price = increase in Supply.
An increase in the cost of inputs makes it less profitable and producers would not be willing to produce as many units at each and every price. Instead they would offer few products for sale = decrease in Supply
Determinant of Supply - # of sellers
An increase in the number of sellers increases the quantity supplied at each price, shifts S curve to the right.
A decrease in the number of sellers decreases the quantity supplied at each price, shifts S curve to the left.
Determinant of Supply - technology
A cost-saving technological improvement has the same effect as a fall in input prices, shifts S curve to the right.
Equipment can break down, or new technology might be hard to obtain, shifting S curve to the left
Determinant of Supply - Government Actions: Taxes
Increase in taxes on goods and services cause the supply curve to shift to the left.
Decrease in taxes on goods and services cause the supply curve to shift to the right.
Determinant of Supply - Government Actions: Subsidies
Subsidies increase the supply of those goods and services, shifting the curve to the right.
Removal of subsidies decrease the supply of goods and services, shifting the curve to the left.
Determinant of Supply - Government Actions: Regulations
Government regulations increase the cost of production = shift S curve left.
De-regulation decreases the cost of production = shift S curve right.
Determinant of Supply - Opportunity Cost of Alternative Production
If a producer can make more selling something else, the supply of what they are currently producing decreases.
Determinant of Supply - Expectations of Future Profit
In general, sellers may adjust supply* when their expectations of future prices change.
(*If good not perishable)
the point where quantity supplied equals quantity demanded
the price that equates quantity supplied with quantity demanded
The quantity supplied and quantity demanded at the equilibrium price.
A legal minimum on the price of a good or service
A legal maximum on the price of a good or service
When quantity demanded is greater than quantity supplied
When quantity supplied is greater than quantity demanded
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