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Chapter 3
Demand, Supply, and Market Equilibrium
22
Economics
Undergraduate 1
01/18/2006

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Cards

Term
6 determinents of demand
Definition
price of a product, income, wealth, price of other products, tastes, expectations
Term
Law of Demand
Definition
As Prices go up, Quantity of demand goes down
Term
Why do demand curves slope downward?
Definition
Constrained by limited income
Term
Diminishing Marginal Utility (DMU)
Definition
Each addiional unit of consumption is worth less
Term
Income
Definition
Earnings isn a given time period
Term
Wealth
Definition
What you owe
Term
Normal goods
Definition
demand goes up if income/wealth goes up
Term
inferor goods
Definition
demand goes down if income/wealth goes up
Term
What happens to the price of Substitute goods
Definition
When th price of one good goes up, the demand for the other good goes up
Term
What happens to the price of complementary goods
Definition
When the price of one good goes up, the demand for the other good goes down.
Term
Tastes/Preferences
Definition
Tastes go up, demands go up
Term
What future expectations affect todays demand?
Definition
Income, wealth, prices, job prospects
Term
What causes a shift of a demand curve
Definition
change in income/wealth/prices of other goods, tastes, expectations
Term
What causes movement along a curve? (change in quantity demanded)
Definition
change in a price of a good
Term
graph - income falls, normal good vs. inferior good
Definition
normal graph shifts left, inferior good shifts right
Term
What does supply depend on?
Definition
Profit potential
Term
Profits =?
Definition
Total revenue - Total costs
Term
Law of supply
Definition
As price goes up, quantitiy of supply goes up
Term
What happens to supply if input prices(wages, rental rates, etc.) go up?
Definition
Supply goes down
Term
What happens to supply if there is technological advance (cost of production goes down)?
Definition
supply goes up
Term
What happens to the supply of one good, if the price of a substitute goes up
Definition
the supply goes down
Term
What happens to the price of one good, if the price of a complement goes up?
Definition
the supply goes up
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