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Definition
| group of buyers & sellers of a particular good/service |
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Definition
| a market in which there are many buyers & sellers so that each as a negligible impact on the market price |
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Definition
1. the goods offered are all the same
2. the buyers & sellers are so numerous that no single buyer/seller has any influence over the market price |
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| the amt. of a good that buyers are willing and able to purchase |
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| the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises |
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Definition
| a table that shows the realtionship btwn the price of a good & the quantity demanded |
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Definition
| the sum of all the individual demands for a particular good/service |
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Definition
| demand for a good falls when income falls |
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Definition
| demand for a good rises when income falls |
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Definition
| increase in price in one leads to an increase in demand for the other |
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Definition
| increase in price of one leads to a decrease in demand for the other |
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| Variables that cause a shift in demand curve (INFLUENCE BUYERS): |
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Definition
price of the good itself
income
prices of related goods
tastes
expectations
number of buyers |
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Term
| Shift vs. Movement along demand curve: |
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Definition
if demand curve SHIFTS, the entire demand curve (line) moves
if demand curve MOVES, the point on the demand curves moves along the same demand curve and the line does not move, only the point does |
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Term
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Definition
| the amt. of a good that sellers are willing and able to sell |
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Definition
| the quantity supplied of a good rises when the price of the good rises |
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Term
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Definition
| chart showing the relationship btwn. the price of a good and the quantity supplied |
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Term
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Definition
| a graph of the relationship btwn. the price of a good and the quantity supplied |
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Term
| Variables that shift the supply curve (INFLUENCE SELLERS): |
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Definition
price of the good itself
input prices
technology
expectations
number of sellers |
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Definition
| when marker price reaches a level at which quantity supplied = quantity demanded |
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Definition
| the price that balances quantity supplied & quantity demanded |
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Term
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Definition
| the quantity supplied and the quantity demanded at the equilibrium price |
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Term
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Definition
| a situation in which quantity supplied is greater than quantity demanded |
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Definition
| situation in which quantity demanded is greater than quantity supplied (excess demand) |
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Term
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Definition
| the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance |
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Term
| three steps for analyzing changes in equilibrium: |
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Definition
1. decide if event shifts supply/demand/both
2. decide in which direction the curve shifts
3. use the supply-and-demand diagram to see how the shift changes the equilibrium price & quantity |
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Term
| ______ refers to the position of the supply curve, whereas _________ refers to the amount suppliers wish to sell |
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Definition
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Term
| a shift in the supply curve = |
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Definition
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| a shift in the demand curve = |
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Definition
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Term
| a movement along a fixed supply curve = |
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Definition
| "change in quantity supplied" |
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| a movement along a fixed demand curve = |
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Definition
| "change in the quantity demanded" |
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Term
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Definition
| a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants |
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Term
| price elasticity of demand |
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Definition
measures how much the quantity demanded responds to a change in price
%changeQd/%changeP |
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Term
| demand for a good is said to be elastic when... |
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Definition
| the quantity demanded responds substantially to a change in price |
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Term
| demand is said to be inelastic if... |
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Definition
| the quantity demanded responds only slightly to changes in price |
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Term
| determinants of price elasticity of demand |
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Definition
availability of close substitutes
necessity vs. luxury
definition of the market
time horizon |
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Term
midpoint method
(better way to calculate % changes and elasticities) |
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Definition
| divide the change by the average of the initial & final levels |
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Term
| demand = elastic if elasticity is (>,=,<) 1 |
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Definition
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| demand = inelastic if elasticity is (<,=,>) 1 |
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Definition
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Term
| if elasticity is exactly 1, demand is said to have... |
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Definition
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Term
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Definition
elasticity = 0
demand curve is vertical
regardless of price, qty. demanded stays the same |
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Term
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Definition
demand curve is horizontal
small price changes cause huge changes in quantity demanded |
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Term
| inelastic curves look like... |
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Definition
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Term
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Definition
| the amount paid by the buyer & received by the sellers of a good, computed as the price of the good times the quantity sold |
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Term
| income elasticity of demand |
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Definition
| a measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as %changeQd/%changeIncome |
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Term
| inferior goods have _________ income elasticities |
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Definition
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Term
| cross-price elasticity of demand |
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Definition
measures how the quantity demanded of one goood responds to a change in price of another good
%changeQd1/%changeP2 |
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Term
| price elasticity of supply |
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Definition
measures how much the quantity supplied responds to changes in the price
%changeQs/%changeP |
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Term
| supply of a good is said to be _________ if the quantity supplied responds substantially to changes in price |
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Definition
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Term
| supply is said to be _________ if the quantity supplied responds only slightly to changes in price |
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Definition
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Term
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Definition
| legal maximum on the price at which a good can be sold |
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Definition
| legal minimum on the price at which a good can be sold |
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Term
| if the price is below a price ceiling it is ___________ |
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Definition
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Term
| if the equilibrium price is above the price ceiling it is said to be _____________ |
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Definition
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| binding price ceilings cause |
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Definition
shortage of goods
sellers must ration the scarce goods among the large # of potential buyers |
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Term
| free markets ration goods with ___________ |
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Definition
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| a common example of a price ceiling is ___________ |
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Definition
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Term
| short-term effects of price ceilings are realatively ____________, while long term effects are ____________ |
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Definition
short term effects = inelastic
long term effects = elastic |
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Term
| binding price floors cause ________ |
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Definition
surplus
minimum wage example |
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Term
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Definition
| the manner in which the burden of a tax is shared among participants in a market |
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| taxes _________ market activity |
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Definition
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| when a good is taxed, the quantity of the good sold is _________ in the new equilibrium |
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Definition
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Term
| when a good is taxed, the new equilibrium causes buyers to pay ______ & sellers to receive _________ |
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Definition
buyers pay more
sellers receive less |
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Term
| a tax burden falls more heavily on the side of the market that is ___________ |
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Definition
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