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Econ Test #2

TermDefinition
Quantity Demanded Amount consumers are willing and able to buy at a certain price.
Law of Demand When price rises, quantity demanded falls, and vice versa.
Law of Supply When price rises, quantity supplied rises, and vice versa.
Demand Schedule A table showing prices and quantities consumers demand.
Demand Curve A graph showing price and quantity demanded.
Substitutes Goods that can replace each other, like Coke and Pepsi.
Complements Goods used together, like printers and ink.
Normal Good A good people buy more of when income increases.
Inferior Good A good people buy less of when income increases.
How Price Affects Quantity Demanded Price rises, quantity demanded falls; price falls, quantity demanded rises.
Quantity Supplied Amount producers are willing and able to sell at a certain price.
Market Demand Total quantity demanded by all consumers at each price.
Equilibrium When quantity demanded equals quantity supplied.
Equilibrium Price The price where quantity demanded equals quantity supplied.
Surplus When quantity supplied is greater than quantity demanded.
Shortage When quantity demanded is greater than quantity supplied.
Finding Equilibrium on a Table Find the price where quantity demanded equals quantity supplied.
Price During a Surplus Price tends to decrease.
Price During a Shortage . Price tends to increase.
Price of a Substitute Increases Demand for the original product usually increases.
Percentage Change in Price (Midpoint Method) New price minus old price, divided by their average, times 100.
Percentage Change in Quantity (Midpoint Method) New quantity minus old quantity, divided by their average, times 100.
Price Elasticity of Demand Measures how quantity demanded responds to price changes.
Price Elasticity of Supply Measures how quantity supplied responds to price changes.
Cross Elasticity of Demand Measures how demand for one good responds to another good's price change.
Income Elasticity of Demand Measures how demand responds to changes in income.
Perfectly Inelastic Quantity does not change when price changes.
Inelastic Quantity changes by a smaller percentage than price.
Unit Elastic Quantity and price change by the same percentage.
Elastic Quantity changes by a larger percentage than price.
Perfectly Elastic Buyers will only buy at one specific price.
Examples of Inelastic Goods Gasoline, necessary medicine, electricity, and basic necessities.
Examples of Elastic Goods Vacations, luxury goods, restaurant meals, and goods with many substitutes.
Total Revenue Price multiplied by quantity sold.
Price Increase with Elastic Demand Total revenue decreases.
Price Increase with Inelastic Demand Total revenue increases.
Price Increase with Unit Elastic Demand Total revenue stays the same.
Market Price Allocation Resources go to people willing and able to pay.
Command Allocation A central authority decides who receives resources.
Majority Rule Resources or decisions are allocated based on what most people choose.
Contest Resources go to the winner of a competition.
First-Come, First-Served Resources go to whoever arrives first.
Sharing Equally Resources are divided equally among people.
Lottery Resources are assigned randomly.
Personal Characteristics Resources are allocated based on traits or qualifications.
Force Resources are obtained through coercion or physical power.
Allocative Efficiency Resources are used to produce the goods and services people value most.
Marginal Benefit The additional benefit from consuming one more unit.
Transaction Costs Costs of arranging and completing an exchange.
Deadweight Loss Lost economic benefits caused by an inefficient market outcome.
Created by: user-1747588
 

 



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