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Supply, Demand, and Equilibrium Quiz Review
Terms in this set (30)
the various amounts of a product that someone is willing and able to buy over a range of possible prices at one point in time
Elasticity of Demand
the extent to which a change in price causes a change in quantity demanded.
a graph of the relationship between the price of a good and the quantity demanded
A situation in which an increase or a decrease in price will not significantly affect demand for the product
A situation in which consumer demand is sensitive to changes in price, meaning demand changes a lot.
change in quantity demanded
movement along the demand curve showing that a different quantity is purchased in response to a change in price. Decrease= Left (Less) while Increase= Right (More)
change in quantity supplied
the change in amount offered for sale in response to a change in price. Decrease= Left (Less) while Increase= Right (More)
the amount of a product that would be produced, grown, or acquired and offered for sale at all possible prices that could prevail in the market.
Law of Supply
producers offer more of a good as its price increases and less as its price falls
Law of Demand
consumers buy more of a good when its price decreases and less when its price increases
the total amount of a good or service available for purchase
a graph of the relationship between the price of a good and the quantity supplied
elasticity of supply
a measure of the way quantity supplied reacts to a change in price
the point at which quantity demanded and quantity supplied are equal and intersect on the supply and demand curve
A situation in which quantity demanded is greater than quantity supplied
A situation in which quantity supplied is greater than quantity demanded
A legal maximum on the price at which a good can be sold. On the graph, you will find a price ceiling below equilibrium. It creates a shortage.
A legal minimum on the price at which a good can be sold. On the graph, you will find a price floor above equilibrium. It creates a surplus.
Exists when a small change in price causes a major change in quantity supplied. For example: Pizza
Exists when a change in a good's price has little impact on the quantity supplied. For example: Cars.
advantages of prices
price as an incentive, prices as signals, flexibility, price system is "free"
Changes in Equilibrium
Change in supply, change in demand, change in price
A financial gain, esp. the difference between the amount earned and the amount spent in buying, operating, or producing something
In a free market economy, prices always ten to move toward
when consumers react to an increase in a good's price by consuming less of that good and more of other goods
When prices of one product rises, the demand of products that compliment it decrease.
Non-price factors affecting demand
3. Price and availability of substitutes.
4. Complimentary Products
Non-price factors affecting supply
1. Cost of production.
2. Cost of resources change.
3. Maximization of profit.
How does scarcity affect price?
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