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# Wills econ

### Term Sheet 3

Law of Demand as prices rise, quantity demand falls; as prices fall, quantity demand rises; inverse relationship
Substitution Effect a change in the quantity demanded of a consumer good that results from a change in its relative expensiveness caused by a change in the product's price
Income effect a change in the quantity demanded of a product that results from the change in real income, or purchasing power, caused by a change in the product's price
Demand schedule a table that shows the quantity demanded of a good or service at different price levels.
Demand Curve A graphical representation of the demand schedule. it shows the relationship between quantity demanded and price
Ceteris paribus with other conditions remaining the same.
Non price determinants a force outside of supply and price that affects the demand for a product.
Normal Goods A good whose demand rises when income increase
Inferior goods A good whose demand decrease when income increases
Complements A good with a negative cross elasticity of demand, meaning the good's demand is increased when the price of another good is decreased.
Substitutes A good that can be used in place of another.
Elasticity of Demand the degree to which the desire for something changes as its price rises.
Inelastic -A condition in which the percentage change in quantity demanded is less than the percentage change in price (Ed<1) -Total revenue falls
Elastic -A condition in which the percentage change in quantity demanded is greater than the percentage change in price (Ed>1) -Total revenue rises
Unitary elastic A condition in which the percentage change in quantity demanded is equal to the percentage change in price (Ed = 1) -Total revenue area stays the same
Total revenue total receipts of a firm from the sale of any given quantity of a product
Supply The desire and ability to produce and sell a product is
Law of Supply keeping other factors constant, an increase in price results in an increase in quantity supplied. In other words, there is a direct relationship between price and quantity: quantities respond in the same direction as price changes.
Quantity Supplied quantity of a commodity that producers are willing to sell at a particular price at a particular point of time.
Supply Schedule a chart that shows how much product a supplier will have to produce to meet consumer demand at a specified price based on the supply curve.
Supply Curve graphic representation of the relationship between product price and quantity of product that a seller is willing and able to supply.
Elasticity of Supply measures the responsiveness of quantity supplied to a change in price. It is necessary for a firm to know how quickly, and effectively, it can respond to changing market conditions, especially to price changes.
Marginal product of labor the change in output that results from employing an added unit of labor.
Increasing marginal returns occurs when the addition of a variable input (like labor) to a fixed input (like capital) enables the variable input to be more productive.
Diminishing Marginal Returns adding an additional factor of production results in smaller increases in output.
Negative Marginal Return the point were additional product begins to lower efficiency.
Fixed Cost economic costs for inputs that remain fixed at all quantities of output
Variable Costs economic costs for inputs that vary at each quantity of output
Total Cost the sum of all fixed and variable costs at each quantity of output
Marginal Cost the sum of all fixed and variable costs at each quantity of output
Marginal Revenue additional income generated from the sale of one more unit of a good or service.
Operating Cost expenses associated with the maintenance and administration of a business on a day-to-day basis.
Average Cost to total cost (TC) divided by the number of units of a good produced
Subsidy an amount of money provided to firms to help reduce production costs which can then be passed on as lower prices, and which can encourage consumption.
Excise Tax an indirect type of taxation imposed on the manufacture, sale or use of certain types of goods and products
Regulation imposition of rules by government, backed by the use of penalties that are intended specifically to modify the economic behavior of individuals and firms in the private sector.
Equilibrium the state in which market supply and demand balance each other, and as a result, prices become stable.
disequilibrium a situation where internal and/or external forces prevent market equilibrium from being reached or cause the market to fall out of balance.
shortage excess demand is a situation in which the demand for a product or service exceeds its supply in a market.
Surplus an amount of something left over when requirements have been met; an excess of production or supply over demand.
Price Ceiling occurs when the government puts a legal limit on how high the price of a product can be.
rent control is a law placing a maximum price, or a “rent ceiling,” on what landlords may charge tenants.
Price Floor the lowest legal price a commodity can be sold at
Minimum Wage the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract”.
Inventory the finished goods a company accumulates before selling them to end users. But inventory can also describe the raw materials used to produce the finished goods, goods as they go through the production process or goods that are "in transit."
Search Cost the time, energy and money expended by a consumer who is researching a product or service for purchase.
Barter services and goods are traded at negotiated rates
Supply Shock an event that suddenly increases or decreases the supply of a commodity or service, or of commodities and services in general.
Rationing the controlled distribution of scarce resources, goods, services, or an artificial restriction of demand.
Black Market economic activity that takes place outside government-sanctioned channel. Transactions that occur "under the table".
Created by: msd321

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