Econ Unit 2
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 | institution of mechanism that brings together buyers and sellers of particular goods, sevices, or resources
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| demand | a schedule or curve that shows the amounts of products consumers are willing and able to purchase at each of a series of possible prices during a specified period of time.
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| demand schedule | table for a single consumer
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| law of demand | as price goes down, quantity goes up (its an inverse relationship)
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| diminishing marginal utility | uutility decreases by additional units purchased
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| Why is relationship inverse? 3 reasons | income effect, subsitution effect, diminishing marginal utility
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| income effect | change in price = change in purchasing power
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| subsitution effect | if a substitute good falls in price, the amount you'll buy of the original good will fall, becuase you'll buy the subsitute instead
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| Determinants of demand | these cause the curve to change. 1. change in income. 2. Change in taste. 3. change in price of compliments or subsitutes 4. change in number of consumers 5. change in consumer expectations of future prices 6. consumer expectation for future income
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| which way does curve shift for increase/ decrease in demand? | right for increase, left for decrease
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| Different types of goods with change in income | normal / superior goods -> income up, demand up.... inferior goods - > income down, demand up
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| change in quantity demanded | change of point on curve, not change in demand.
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| supply | # of units of a product the seller is willing and able to sell at various prices
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| supply schedule | table for one seller's supply
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| law of supply | prices rise, quantity supplied rises (direct relationship)
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| why does supply get smaller as the quantity gets higher? | as more is produced, it cost more to make each unit. think that as more labor is used, its like 'too many cooks in the kitchen ruin the meal'
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| Determinants of Supply | 1. Taxes and Subsities (tax more, supply down) 2. Technology (almost always increase) 3. Price Expectations 4. Resource prices 5. Number of Sellers 6. Price of other goods (what the factory could be making instead)
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| shortage | excess demand
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| equilibrium price | demand and supply are satisfied
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| equilibrium quantity | number of units at equilibrium price
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| rationing function of prices | ability of the competitive forces of supply and demand to establish a price where selling and buying decisisions are constant
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| price ceiling | max legal price to charge
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| price floor | min legal price
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| total utility | total amount of satisfaction or pleasure a person derives from consuming some specific quantity
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| marginal utility | extra satisfaction a consumer realizes from an additional unit of a product
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| law of diminishing marginal utility | marginal utility goes down as you get more product
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| Influences of Consumer Choice | *rational behavior (getting most for money) * preferences * budget constraints * prices
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| utility- maximizing rule | you should spend until the MU is equal to the MU of the last dollar spend on another good
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| GRAPH Chang in demand | Q and P change in same direction
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| GRAPH Change in Supply | Q moves in same direction, P moves in opposite
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| GRAPH S and D opposite direction | Q is I, P moves with demand
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| GRAPH S and D in same direction | P is indetermininate
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