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19 terms

AVC 12 Econ Chapter 3

STUDY
PLAY
Law of Supply
the rule that, holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied.
Law of Demand
A law which states that when supplies of goods and services become plentiful, prices tend to drop. When supplies become scarcer, prices tend to rise.
demand
the amount of goods and services people are willing to buy
cost/benefit analysis
Analyzing a situation, predicting the likely possible outcomes, and deciding what prices are worth paying and what outcomes to pursue.
product market
where all sales of consumer products take place
factor market
where all sales of the factors of production take place
consumers
those who utilize services or products, and those who pay the bills.
1. taste
2. income
3. cost of relate products
4. number of potential customers
determinants of demand
elasticity
the affect that a change in price has on demand
supply
the term given for the number of units that a firm is willing to sell.
substitute goods
goods that can be used in place of each other.
diminishing returns
the result of paying over time, hiring less skilled workers, or simply the result of over-crowded. If a firm becomes too big it loses it's connection with the customer.
surplus
amount of a product that a firm offers for sale in excess of the quantity that customers are willing to buy.
shortage
amount of the product customers want to buy in excess of the quantity that a firm offers for sale.
circular flow model
A chart that shows the flow of money, goods and services, and the four factors of production
complementary goods
Two goods that are used together
Supply curve
a curve that shows the relationship between the price of a product and the quantity of the product supplied.
Equilibrium
the point at which quantity demanded and quantity supplied are equal
Price inelasticity
No matter how high the price gets, people will still buy certain products.