Market Behavior

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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


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