Ch. 7,8,9

Several determinants can affect the demand curve.

1. Income 2. Tastes and preferences 3. Prices of related goods and services 4. Expectation 5. Number of buyers

Complement

A good with a negative cross elasticity of demand, meaning that a goods demand wil increase when the price of another good is decreased.

Shift

A shift in a demand or supply curve occurs when the quantity demanded or supplied changes even thigh price remains the same.

Substitute

A substitute good is a good with a positive cross elasticity of demand, which means that a goods demand is increased when the price of another good is increased,

Ineslatic products

An inelastic situation occurs when supply and demand for a good or service remain unchanged despite fluctuations in price.

Tastes and preferences

Are a non-price determinant of demand that measure the intensity of buyers' desire for goods and services.

Determinants of supply

Are factors that can influence how much of a particular food or service producers are willing to provide.

Determinants of demand

Are factors that determine changes in individual demand and market demand.

Factors of production

Are the productive resources used to produce goods and services,

Production cost

Comprises any cost related to creating a good or service, such as a raw materials and labor costs.

Elasticity

In economics, it refers to the response of consumers and suppliers to changes in price. It is equal to the percentage change in quantity divided by the percentage change in price.

Market price

In economics, market price is the economic price for which is good or service is offered in the market place.

Price floor

Is a limit imposed by government or a group on what is the lowest price that can be changed for a product. For it to be effective, it must be greater tag the equilibrium price.

Inferior good

Is a product that experiences a decrease in demand when a consumers income level increases.

Change in demand

Is an actual shift in the demand curve as a whole. Such a shift occurs when the demanded quantity of a good changes even though price remains the same.

Change in supply

Is an actual shift in the market supply curve. Many producers, which is the market as a whole, increase or decrease their supply to the market.

Supply and demand

Is an economic concept in which supply is the amount a market can offer and demand is how much of a product or service is wanted by buyers.

Normal good

Is one that experiences an increase in demand as the real income of an individual or economy increases.

Demand curve

Is recorded on a demand schedule, which is plotted on a graph as a demand curve that usually slopes downward. The downward slope reflects the relationship between price and quantity demanded: as price decreases, quantity demanded increases.

Equilibrium quantity

Is the amount of a good or service at the price at which the amount supplied equals the amount demanded.

Quantity supplied

Is the amount of a good or service producers ad willing to supply at a given market price, when all other variables are held the same.

Quantity demanded

Is the amount of a product or service consumes are willing to buy at a given price, when all other variables are held the same.

Price ceiling

Is the highest allowed price for a good or service.

Market demand

Is the total amount of purchases of a specific product in a specific market over a specific period.

Surplus

Is when the quantity supplied of a good or service is great than the quantity demanded.

Unintended consequence

Occurs when an action results in an outcome that was not intended.

Shortage

Occurs when the quantity supplied of a good or service is less than the quantity demanded.

Equilibrium price

Price of a good or service is the one price at which quantity supplied equals quantity demanded.

Price elasticity of supply

Reflect the products' response to price changes.

Price elasticity of demand

Reflects the consumers' response to price changes.

Law of diminishing returns

States that as a variable units of resources are added, such as labor and capital, there will be an eventual point where a additional variable unit will add less to the output of the product.

The law of demand

States that people will buy more of a good or service at lower prices and less at higher prices, if everything else remains the same.

Law of supply

States that producers will increase the quantity supplied at higher prices and decrease the quantity supplied at lower prices, if everything else remains the same.

Factor substitution

The ability of a firm to interchange production resources (labor, land, and capital) affects the elasticity to react to price and demand changes.

Number of buyers

When there are more buyers in the market, demand increases, which means there will be more quantity demanded at every price.