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chapter 4 and 5 voca

Demand consumers are willing and able to buy a good or service
law of demand increase in a goods price causes a decrease in the quantity demanded
purchasing power the amount of money or income that people have available to spend on goods or services
income effect any increase or decrease in consumer's purchasing power caused by change in price
substitution effect the tendency of consumers to sustitute a similar, lowered price product for another product that is relatively more expensive
diminsihing marginal utility as more units of a product are consumed, the satisfication recieved from consuming each additional unit declines
demand schedule shows the relationship between the price of a good or service and the quantity that consumers demand
demand curve plots the relationship between the price of a product and the quantity demanded
determinants of demand A shift in either the D2 or D3 curve means that a different quantity of car stereos is demanded at each and every price
substitute goods goods that can be used to replace the purchase of similar goods when prise rises
complementary goods goods that are commonly used with other goods
Elasticity of demand the degree to which changes in goods price affect the quantity demanded by consumers
law of supply the principle that producers will supple more of a product or service at higher prices but less of a product or service at lower prices
profit motive the desire to make money
cost of production the total cost of materials, labor, and other inputs required in the manufacture of a product
supply curve a graphic representation of a supply schedule, showing the relationship between the price of an item and the quantity supplied during a given time period, with all other things being equal
determinant of supply a nonprice factor that influences the available supply of a good or service
tax a required payment to a local, state, or national gov. usually made on some regular basis
law of deminishing returns the priniciple that as more of one input (such as labor) is added to a fixed supply of other resources (such as capital), productivity will increase up to a point, after which the marginal product will diminish
overhead the sum of a buisness's fixed costs except for wages and the material costs
variable costs a cost of doing buisness that changes directly with a change in the level of output, typincally rising and dropping as production increases and decreases
marginal costs the costs of producing one additional unit of output
market failure a flaw in a price system that occurs when some costs have not been accounted for and therefore are not properly distributed
externality an effect that an economic activity has on people and buisnesses that are niether producers nor consumers of the good or service being produced. Can either be positive or negative
public good any good or service that is consumed by all members of a group, regardless of who has helped to pay for it
market equilibrium the point at which the quantity supplied and quantity demanded for a product are equal at the same prices
surplus a situation in which the quantity supplied of an item at a given price exceeds the quantity demanded
shortage a situation in which the quantity demanded of a good or resource exceeds the quantity supplied
price ceiling a gov. regulation that sets a max. price for a particular good
price floor a gov regulation that sets a min. price for a particular good
minumun wage the lowest hourly rate that an employer legally can pay a worker, as established by federal law
rationing a system by which a gov. or other institution decides how to distribute a good or service; rationing is usually the result of limited supply
Created by: DanielleandJerry



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