Market Behavior
familiarity
EASY TO UNDERSTAND LEADING TO EFFICIENT DECISIONS
Inelastic
Purchase can be delayed (elastic or inelastic)
consumer income
The amount of income remaining after taxes and expenses have been deducted from wages
expectations
The anticipations of consumers, firms, and others about future economic conditions.
consumer tastes
Trends and fashions that are highly desirable to the consumer
elastic supply
When a small change in price causes a major change in the quantity supplied
number of consumers
When one sector of the population grows, demand increases for products that sector uses.
inelastic supply
a change in price has relatively little effect on quantity supplied; the percentage change in quantity supplied is less than the percentage change in price; the price elasticity of supply has a value less than 1.0
fixed cost
a cost that does not change, no matter how much of a good is produced
variable cost
a cost that rises or falls depending on how much is produced
demand curve
a curve that shows the relationship between the price of a product and the quantity of the product demanded
supply curve
a graph of the relationship between the price of a good and the quantity supplied
elastic
adequate substitutes (elastic or inelastic)
inelastic
amount of income is small (elastic or inelastic)
elastic
amount of income required in high (elastic or inelastic)
Neutrality
$ ARE THE RESULT OF COMPETITION & FAVOR NEITHER THE BUYER OR SELLER
flexibility
$ CAN RESPOND TO UNEXPECTED SHOCKS IN THE MARKET
profit maximization
A method of setting prices that occurs when marginal revenue equals marginal cost.
inelastic demand
A situation in which an increase or a decrease in price will not significantly affect demand for the product
elastic demand
A situation in which consumer demand is sensitive to changes in price
production stage 2
diminishing returns, firm begins to diminish from extra input
marginal cost
divide the cost of adding each additional worker (variable cost) by the additional product each worker generated (marginal product)
marginal product
extra output due to the addition of one more unit of input
total cost
fixed costs plus variable costs
revenue
income
production stage 1
increasing returns, the firm benefits form extra input
production stage 3
negative returns, output is harmed by extra input
unit elasticity
product demand for which relative price changes and changes in quantity demanded are equal
marginal revenue
the additional income from selling one more unit of a good; sometimes equal to price
income effect
the change in consumption resulting from a change in real income
substitution effect
the change in quantity demanded because of the change in the relative price of the product
demand elasticity
the extent to which a change in price causes a change in the quantity demanded
marginal utility
the extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product
production function
the relationship between quantity of inputs used to make a good and the quantity of output of that good
marginal
the result of a small change
total revenue
the total amount of money a firm receives by selling goods or services
theory of production
theory that describes the relationship between the factors of production and the output of goods and services
average revenue
total revenue divided by the quantity sold
substitutes
two goods for which an increase in the price of one leads to an increase in the demand for the other
complements
two goods that are bought and used together
