34 terms

AP Micro Module 2

FLVS AP Micro Terms
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Demand
How much of a good or service consumers are willing and able to purchase at each price. When demand changes, the entire line shifts right or left. Demand is changed by price of related goods (substitutes and complements), price expectations, income, number of buyers, and tastes and preferences.
Quantity Demanded
The amount of a good or service buyers are willing and able to purchase at one price.
Price
The cost of acquiring a good or service.
Law of Demand
The law that states that as the price of any good or service increases, the quantity of that good or service demanded will fall and vice versa.
Income
The money earned from work.
Wealth
The accumulated value of assets.
Tastes and Fashion
Consumer desires for some good or service.
Population and the number of buyers in the market
The number of people willing and able to buy a good or service.
Price of substitutes
The price of goods or services that can be freely substituted for some other good or service.
Price of complements
The price of goods or services that are used in conjunction with some other good or service.
Expectations concerning future prices
What consumers will think happen to prices in the future - a determinant of demand.
Supply
How much of a good or service producers are willing and able to supply at every price.
Quantity Supplied
The amount of a good or service sellers are willing and able to sell at one price.
Law of Supply
The law of supply states that as the price of any good or service increases, the quantity of that good or service will increase and vice versa.
Input Costs
The costs of labor, capital and natural resources.
Technology
The knowledge of how to produce some good.
Sellers
Firms or individuals who are willing and able to sell some good or service.
Input
A good used to produce another good.
Equilibrium
Where quantity demanded equals quantity supplied.
Shortage
A situation where quantity demanded is greater than the quantity supplied because the price is below the market equilibrium.
Surplus
The excess product when supply is greater than quantity demanded.
Barter
The exchange of goods or services without the use of money.
Rationing
A way of distributing a scare good or service.
Tariff
A tax levied on imports.
Quota
A limit on the quantity of some sort of activity, such as imports.
Determinants of Demand
Also known as demand shifters, they result in the leftward (decrease) or rightward (increase) shifts in the demand curve.
Determinants of Supply
Also known as supply shifters, they result in the leftward (decrease) or rightward (increase) shifts in the supply curve.
Chain of Causation
Refers to the chain of events that occur when the demand for, or supply of a good or service changes.
Economies of Scale
Cost savings associated with large scale production.
Elasticity of Demand
A percentage measurement that shows how a change in price will bring about a larger change in quantity demanded.
Inelastic Good
A good where consumers are not very responsive to price change.
Elastic Good
A good where consumers are very responsive to changes in prices.
Elasticity of Supply
A measure of the percentage change in quantity demanded for every one percent change in price.
Elastic Supply
A situation where any change in price, in percentage terms, will bring about a larger change in quantity supplied.