Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
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| Market | A group of buyers and sellers of a particular good or service
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| Buyers as a group | Determine the demand for the product
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| Sellers as a group | Determine the supply of the product
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| Competitive Market characteristics | - Many buyers and many sellers
- Each have tiny impact on market price
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| Perfectly Competitive Market characteristics | - All goods are exactly the same(commodities)
- So many buyers and sellers that no one can impact the market price
- called “price takers”
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| Quantity demanded | Amount of a good that buyers are willing and able to purchase
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| Law of Demand | - When the price of a good rises, the quantity demanded of the good falls
- When the price falls, the quantity demanded rises
- assuming “All else equal”
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| Demand Schedule | A table that shows the relationship between the price of a good and the quantity demanded
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| Demand Curve | A graph that shows the relationship between the price of a good and the quantity demanded
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| Market Demand | Sum of all individual demands for a good
- sum of the individual demand curves horizontally
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| How to find Market Price | Add individual demands(quantity demands)together
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| “Other things” | Things outside of the price that may impact the demand
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| Changes in the “other things” causes | The demand curve to shift
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| Shift to the right means | quantity demanded will be higher
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| Shifts to the left means | Quantity Demanded will be lower
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| Demand Curve Shifters | - Number of buyers
- Income
- Prices of related goods (substitutes&complements)
- Tastes
- Expectations
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| Demand Curve Sliders only impact | The quantity demanded
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| Normal Goods | Luxury watches
Size of home
gas
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| An increase in income leads to an increase in demand for (all things equal) | Normal Goods
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| Inferior Goods | Spam
Ramen noodles
used cars
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| An increase in income leads to a decrease in demand for (all things equal) | Inferior goods
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| Substitutes | Chicken sandwiches and Hamburgers
Coke and Pepsi
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| Two goods are substitutes if | An increase in the price of one leads to an increase in the demand for the other
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| Complements | Eggs and Bacon
Bagels and Cream Cheese
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| Two goods are complements if | An increase in the price of one leads to a decrease in the demand for the other
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| Tastes | Ad Campaigns
Diet fads
Influencers
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| Anything that causes a shift in tastes towards a good will increase demand for that good and shift the D curve to the right | Tastes
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| Predictions about the future that impact demand | Expectations
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| Variables that move in the same direction | Positive Correlation
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| Variables that move in opposite directions | Negative Correlation
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| Slope Formula | y = y1 - y2
x1 - x2
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| Why is slope used | To show how much one variable responds to another
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| Omitted Variable | Relevant variables that are left out causing a deceptive graph
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| Reverse causality | Assuming a variable is causing something based off the date alone
Ex: More police in a city with more crime ≠ Police cause more crime
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| Equilibrium | Market Price has reached the level at which the quantity supply and quantity demand are even
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| Equilibrium Price | Price of quantity supply and quantity demand are equal
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| Equilibrium Quantity | Quantity at which the quantity supply and quantity demand intersect
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| Surplus | Quantity Supply is greater than quantity demand
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| Price change | Movement along supply and demand curves
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| How to reach equilibrium during a Surplus | Prices dropped until equilibrium
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| Shortage | Quantity Demand is greater than Quantity supply
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| how to reach equilibrium during shortage | prices increase until equilibrium
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| 1st step to to analyzing changes in equilibrium | Decide whether or not the events shift the supply curve or the demand curve or both
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| 2nd step to to analyzing changes in equilibrium | Decide whether or not the shift is to the right or left
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| 3rd step to to analyzing changes in equilibrium | Use the supply and demand diagram to compare the initial equilibrium to the new one
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Created by:
koreanfish