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Econ Supply & Demand
Midyear Prep
| Question | Answer |
|---|---|
| demand | when you want stuff, the desire for stuff, needs and wants |
| demand curve | downwards sloping curve that reflects the LoD. Demand curve shifts if: change in related goods, change in tastes and preferences, change in # of consumers, change in consumer wealth/income, change in expectations |
| elasticity of demand | Elastic demand: there is more response to changes in the price. Luxury products, durable, expensive to a person's income, substitutes. Inelastic demand: cannot respond or change if events happen: necessity, no substitutes, price is low relative to income |
| Law of Demand | As the price falls, the quantity of demand increases. |
| marginal utility | the added satisfaction that a consumer gets from having one more unit of a good or service |
| elasticity of supply | If the supply changes little with a change in price, then supplies are considered inelastic. Supply is elastic if there are large changes in supply for a small change in price. |
| Law of Supply | As the price rises, the quantity of supply increases. |
| supply | the total amount of a specified product or service that is available to customers |
| supply curve | upwards to the right. shifting the supply curve: change in input prices, change in # of producers, change in gov't involvement, change in related goods, changes in tech, changes in expectations |
| black market | a market that operates outside the legal system. higher incidence of defective products, higher profit rates, greater use of violence to resolve disputes |
| price ceiling | establishes max. price that sellers are legally permitted to charge. Direct effect: shortage; the quantity demanded will exceed the quantity supplied, waiting lines. Indirect effect: Quality deterioration, changes in non-price factors |
| equilibrium price | An equilibrium price is a balance of demand and supply factors. Prices will return to this equilibrium naturally if the original price is too high or too low unless there is a price floor or ceiling |
| market price | Market prices are dependent upon the interaction of demand and supply. MP change if either one of the supply or demand changes |
| price floor | establishes a minimum legal price for the good/service. direct effect: surplus, quantity supplied exceeds quantity demanded ex) minimum wage |
| What is the relationship between supply, demand and price? | |
| How are prices determined in a market economy? | |
| What are the advantages and disadvantages of government involvement in the economy? | |
| How do the laws of supply and demand help illustrate the advantages and disadvantages of taxation? |
Created by:
undercoverkookie68
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