Term
| What is the law of supply? |
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Definition
| suppliers will normally offer more for sale at high prices and less at lower prices |
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Term
| What are the four determinants of demand? |
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Definition
| consumer incomes, perceived utility, number of buyers, and related goods (substitutes and compliments) |
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Term
| What is percevied utility? |
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Definition
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Term
| How does the number of buyers affect the demand curve? |
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Definition
| it will shift if there are more buyers |
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Term
| What is a change in supply? |
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Definition
| a situtation where suppliers offer different amounts of products for sale at all possible prices in the market |
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Term
| What is demand elasticity? |
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Definition
| the extent to which a change in price causes a change in the quantity demanded; the more the prices change, demand changes |
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Term
| What is a producer surplus? |
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Definition
| a situation in which the quantity supplied is greater than the quanity demanded at a given price |
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Term
| What is supply elasticity? |
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Definition
| a measure of the way in which the quantity supplied responds to a change in price |
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Term
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Definition
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Term
| What is diminishing marginal utility? |
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Definition
| the principle which states that the extra satisfaction we get from using additional quanities of a product begins to decline (why people only buy one newspaper) |
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Term
| What are the determinants of demand elasticity? |
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Definition
| postponability (necessity or luxury), availability of substitutes, percent of income |
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Term
| What is marginal utility? |
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Definition
| the additional satisfaction that someone gets from the use of a product |
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Term
| What is the change in quantity suppllied? |
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Definition
| the change in amount offered for sale in response to a change in price |
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Term
| What are complementary goods? example? |
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Definition
| the use of one increases the use of the other; peanut butter and jelly |
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Term
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Definition
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Term
| What is the consumer surplus? |
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Definition
| if you are willing to pay more for something but don't have to |
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Term
| What is a price floor? example? |
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Definition
| lowest legal price that can be paid for a good or service; minimum wage |
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Term
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Definition
| something that can be postponed; example would be ski trip |
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Term
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Definition
| something that cannot be postponed; an example would be insulin for diabetics |
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Term
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Definition
| a situation in which the quanity supplied is greater than the quantity demanded at a given price |
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Term
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Definition
| a system under which a government agency decides everyone's "fair" share |
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Term
| What is the equilibrium price? |
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Definition
| the price at which the number of units produced equals the number of units sold |
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Term
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Definition
| a situation in which the quanity demanded is greater than the quantity supplied at a given price |
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Term
| What is the change in quanity demanded? |
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Definition
| movement along the demand curve shwoing that the amount someone is willing to purchase changes when the price changes |
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Term
| What is the law of demand? |
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Definition
| the quanitity demanded varies inversely with its price; when the price of something goes up, the quanity demanded goes down; when the price goes down, quantity demanded goes up |
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Term
| What is the subsitution effect? |
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Definition
| change in quantity demanded becasue of the change in the relative price of the product |
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Term
| What is an example of the substituion effect? |
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Definition
| if the price of a concert ticket increases, people are more likely to buy CDs |
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Term
| What is the variable cost? example? |
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Definition
| costs that change when the business's rate of otuput changes; cost of electric power to run machines and freight charges to ship the final product |
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Term
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Definition
| a maximum legal price that can be charged for a product |
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Term
| What is an inferior good? example? |
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Definition
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Term
| What are subsitute goods? example? |
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Definition
| goods that can be used in place of other goods; butter and margarine-- a rise in the price of butter will cause and increase in the demand for margarine |
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Term
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Definition
| the lowest legal wage that can be paid to most workers |
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Term
| What is a fixed cost? example? |
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Definition
| the costs that an organization incurs even if there is little or no activity; salaries paid to executivies--they will always get paid the same amount |
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Term
| What is a deadweight loss? |
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Definition
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Term
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Definition
| expenses that change in response to activity of the business |
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Term
| What is a deadweight loss? |
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Definition
| loss of economic efficiency |
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Term
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Definition
| demand increases when incomes increase |
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Term
| What is an inferior good? |
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Definition
| a good that decreases in demand when consumer incomes rise |
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Term
| What are the determinants of supply? |
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Definition
| a change in the price of resources, a change in technology, a change in the number of sellers, a change in taxes and regulations, or a change in political, social, and economic expectations |
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Term
| What are the determinants of supply elasticity |
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Definition
| if a firm can adjust well to price change, then the supply is elastic; if not, then the supply is inelastic |
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