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50 terms

Supply and Demand Vocab

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demand
combination of desire, ability, and willingness to buy a product
microeconomics
branch of economic theory that deals with behavior & decision making by small units such as individuals & firms
demand schedule
listing showing the quantity demanded at all possible prices that might prevail in the market at a given time
demand curve
graph showing the quantity demanded of a product at each and every possible price that might prevail in the market at a given time
law of demand
rule stating that more will be demanded at lower prices and less at higher prices; inverse relationship b/w price and quantity demanded
market demand curve
demand curve that shows the quantities demanded by everyone who is interested in purchasing a product
marginal utility
satisfaction or usefulness obtained from acquiring one more unit of a product
diminishing marginal utility
decreasing satisfaction or usefuness as additional units of a product are acquired
change in quantity demanded
movement along the demand curve showing that a different quanity is purchased in response to a change in price
income effect
the portion of a change in quantity demanded caused by a change in a consumer's real income when the price of a product changes
substitution effect
the portion of a change in quantity demanded due to a change in the relative price of a product
change in demand
consumers demand different amounts at every price, causing the demand curve to shift to the left or the right
substitutes
competing products that can be used in place of one another; products related in such a way that an increase in price of one increases the demand for the other
complements
products that increase the value of other products; products related in such a way that an increase in the price of one reduces the demand for both
elasticity
a measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price
demand elasticity
measure of responsiveness relating change in quantity demanded (dependent variable) to a change in price (independent variable)
elastic
type of elasticity where the percentage change in the independent variable (usually price) causes a more than proportionate change in the dependent variable (usually quantity demanded or supplied)
inelastic
type of elasticity where the percentage change in the independent variable (usually price) causes a less than proportionate change in the dependent variable (usually quantity supplied or demanded)
unit elastic
elasticity where a change in the independent variable (usually price) generates a proportional change of the dependent variable (quantity demanded or supplied)
supply
schedule of quantities offered for sale at all possible prices in a market
law of supply
rule stating that more will be offered for sale at high prices than at lower prices
supply schedule
tabular listing showing the quantities produced or offered for sale at each and every possible price in the market
supply curve
graphical representation of the quantities produced at each and every possible price in the market
market supply curve
supply curve that shows the quantities offered at various prices by all firms that sell the product in a given market
quantity supplied
amount offered for sale at a given price; point on the supply curve
change in quantity supplied
change in amount offered for sale in response to a price change; movement along the supply curve
change in supply
different amounts offered for sale at each & every possible price in the market; shift of the supply curve
subsidy
gov. payment to encourage or protect a certain economic activity
supply elasticity
responsiveness of quantity supplied to a change in price
theory of production
theory dealing with the relationship between the factors of production and the output of goods and services
short run
production period so short that only variable inputs can be changed
long run
production period long enough to change amount of variable & fixed inputs used in production
law of variable proportions
rule stating that short-run output will change as one input is varied while the others are held constant
production function
graphic portrayal showing how a change in the amount of a single variable input affects total output
raw materials
unprocessed natural resources used in production
total product
total output or production by a firm
marginal product
extra output due to the addition of one more unit of input
stages of production
phases of production: increasing, decreasing, & negative returns
diminishing returns
stage of production where output increases at a decreasing rate as more units of variable input are added
fixed cost
cost of production that does not change when output changes
overhead
broad category of fixed costs that includes interest, rent, taxes, & executive salaries
variable cost
production cost that varies as output changes; labor, energy, raw materials
total cost
variable plus fixed cost; all costs associated with production
marginal cost
extra cost of producing one additional unit of production
e-commerce
electronic business or exchange conducted over the internet
total revenue
total receipts; price of goods sold times quantities sold
marginal revenue
extra revenue from the sale of 1 additional unit of production
marginal analysis
decision making that compares the extra cost of doing something to the extra benefit gained
break-even point
production needed if the firm is to recover its costs; production level where total cost equals total revenue
profit maximizing quantity of output
level of production where marginal cost is equal to marginal revenue