Term
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Definition
| The inability to satisfy all our wants |
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Term
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Definition
| Land, labor, capital (human), entrepreneurship |
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Term
| Production Possibility Frontier |
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Definition
| The boundary between those combinations of goods and services that can be produced and those that can not |
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Term
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Definition
The Opportunity cost of producting one more unit, increases as we move along the PPF
- MC > MB - overproduction (cost of producing next unit is greater than MB) |
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Term
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Definition
The benefit received from consuming one more unit, decreasing
- MB > MC - underproduction |
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Term
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Definition
| The highest-valued alternative that we give up to get something else, always INCREASING |
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Term
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Definition
| Market that has so many buyers and sellers that no single buyer/seller can influence the prince |
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Term
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Definition
The higher the price of the good, the smaller the quanity demanded
- inverse relationship between price and quanity demanded |
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Term
| Substituion/Income effect |
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Definition
- Substitution- as price rises (opp cost) people buy more of its substitute
- Income - as price rises, consumer can not afford product so stops buying (no actual change in income) |
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Term
| Factors that influence the demand curve |
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Definition
- Price of related goods
- Expected future prices
- Income
- Expected fucture income
- Population
- Prefernces |
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Term
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Definition
- Change in demand: SHIFTS the curve, affected by all factors other than price
- Change in QUANTITY demand: moves along the curve, affected by price |
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Term
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Definition
| Sub - good that can be used in place of another, if price rises of sub, SHIFTS demand curve to the right |
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Term
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Definition
Comp - good used with another good
- price falls of comp, demand SHIFTS to the right of both good (bc demand increased) |
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Term
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Definition
| Demand increases as income increases |
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Term
| Demand of an Inerior Good |
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Definition
| Demand decreases as income increases |
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Term
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Definition
| The higher the price of a good, the greater quanity supplied |
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Term
| Factors Influencing Supply |
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Definition
- Prices of resources used to produce the good
- Prices of related goods
- Expected future prices
- Number of suppliers
- Change in technology |
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Term
| Supplied/Quanity Supplied |
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Definition
Quanity - Movement along the curve
Supplied - SHIFT of the curve (need a change in the COST to produce to shift the curve) |
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Term
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Definition
Excess supply
- demand increases forcing prices down |
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Term
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Definition
inadequate supply
- forces prices up |
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Term
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Definition
- Increase: both price and demand increase
- Decrease: both price and demand decrease |
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Term
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Definition
- Increase: quanity increases, price falls
- Decrease: quanity decreases, price rises |
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Term
| Price Elasticity of Demand |
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Definition
Measure of the responsiveness of the quanity demanded of a good to a change in its price
= % change in QD/ % change in price |
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Term
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Definition
> 1 elastic
0 - 1 inelastic
= 1 unit elastic
= infinity perfectly elastic
= 0 perfectly inelastic |
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Term
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Definition
= P * Q
- price and quanity move in opp. directions
- elastic: price down- TR up
- inelastic: price down - TR down
- unit elastic: price down - TR same |
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Term
| Factors Influencing Price Elasticity of Demand |
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Definition
- more substitutes; more elastic
- more income spent; more elastic
- smaller market; more subs; more elastic
- more time; more elastic |
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Term
| Elasticity on a straight line demand curve |
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Definition
- Above midpoint; elastic
- Below midpoint; inelastic
- At midpoint; unit elastic |
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Term
| Cross Price Elasticity of Demand |
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Definition
Measure of responsiveness of the demand of one good to the change in price of a substitute or complement
= %D in QD1/ %D in P2
+ for substitue
- for complement |
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Term
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Definition
Measure of responsiveness of a good to a change in income
= %D in QD / %D in income
> 1; normal, income elastic
0 - 1; normal, income inelastic
< 0; inferior |
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Term
| Price Elasticity of Supply |
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Definition
Measure of responsiveness of the quantity supplied to change in price of a good
= %D in QS / %D in Price
>1; elastic
0 - 1; inelalstic |
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Term
| Perfectly elastic/inelastic supply |
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Definition
infinity - perfectly elastic
0 - perfectly inelastic |
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Term
| Factors Influencing Price Elasticity of Supply |
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Definition
- More resource substitution; more elastic
- Greater amount of time; more elastic
(momentary supply = perf inelastic) |
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Term
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Definition
| value of a good minus the price paid for it, summed over the qty bought |
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Term
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Definition
| price of a good minus the opportunity cost of producing it, summed over the qty sold |
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Term
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Definition
| regulation that makes it illegal to charge a price above a specified level |
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Term
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Definition
regulation that makes it illegal to pay a price below a specified level
-minimum wage |
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Term
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Definition
-increase prices paid by buyers
-lowers the prices received by sellers |
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Term
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Definition
payments by the gov't to producers
-decreases the prices paid by buyers
-increases the prices received by sellers |
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Term
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Definition
| limits to the qty that a firm is permitted to produce |
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Term
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Definition
| decrease in consumer surplus and producer surplus that results from producing an inefficient qty of the good |
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Term
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Definition
| division of the burden of a tax between the buyer and the seller |
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Term
(tax division and elasticity of demand)
...who pays? buyers or sellers?
-perfectly inelastic
-perfectly elastic demand |
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Definition
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Term
(tax division and elasticity of supply)
... who pays? buyers or sellers?
-perfectly inelastic supply
-perfectly elastic supply |
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Definition
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Term
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Definition
| illegal tading arrangement in which the price exceeds the legally imposed price ceiling |
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