Unit 2- Civics Today Chapter 21

substitute

A competing product that consumers can use in place of another Facts 1. Bojangles is a substitute for chick fil a 2. Substitute products can replace other products that are very similar

subsidy

A government payment to an individual, business, or group in exchange for certain actions Facts 1. usually in the form of a cash payment or a tax reduction 2. typically given to remove some type of burden Beyond: Subsidy is often considered to be in the overall interest of the public.

marginal utility

Additional use that is derived from each unit acquired Facts 1. additional satisfaction a consumer gains 2. only from consuming one or more unit Beyond: Marginal utility is an important economic concept because economists use it to determine how much of an item a consumer will buy

demand curve

Downward-sloping line that graphically shows the quantities demanded at each possible price Facts 1. can shift if there is a decrease in price of a substitute. Increase in price of a complement. Decrease in income if good is normal good. 2. relationship between a commodity's different price levels and quantities which consumers are willing to buy

minimum wage

Lowest legal wage that can be paid to most U.S. workers Facts 1. example of price floor 2. minimum wage in the US is $7.25 per hour

price ceiling

Maximum price that can be charged for goods and services, set by the government Facts 1. if the price ceiling is set below the market price, then a shortage is created 2. price will be capped at a level below the market equilibrium

demand elasticity

Measure of responsiveness relating change in quantity demanded to a change in price Facts 1. also referred to as the price elasticity of demand 2. measures how responsive demand is to changes in a price of a given good. Beyond: Price Elasticity of Demand. The first law of demand states that as price increases, less quantity is demanded.

price floor

Minimum price that can be charged for goods and services, set by the government Facts 1. used by the government to prevent prices from being too low 2. most common price floor is minimum wage Beyond: A price floor must be higher than the equilibrium price in order to be effective.

complement

Product often used with another product Facts 1. shampoo and conditioner 2. ice cream and an ice cream cone

supply elasticity

Responsiveness of quantity supplied to a change in price Facts 1. supply is usually more price elastic the longer the time period that a supplier is allowed to adjust its production levels 2. availability of resources, innovation of technology and the amount of producers effects elasticity

shortage

Situation in which quantity demanded is greater than quantity supplied Facts 1. could cause raise in price 2. result: consumers might not be able to get as much of the good as they would like Beyond: We run into scarcity because resources are limited, and we are a society with unlimited wants

surplus

Situation in which quantity supplied is greater than quantity demanded Facts 1. difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually do pay 2. consumer and producer surplus's

demand schedule

Table showing quantities demanded at different possible prices Facts 1. indicates that there is an inverse relationship between price and quantity demanded 2. It is represented by the intersection of the demand and supply curves.

supply schedule

Table showing quantities supplied at different possible prices Facts 1. table that shows the relationship between the price of a good and the quantity supplied 2. shows you how the supply changes when you increase or decrease the price. Beyond: the supply curve is a graphical depiction of the supply schedule that illustrates that relationship between the price of a good and the quantity supplied .

supply

The amount of goods and services that producers are able and willing to sell at various prices during a specified time period Facts 1. you can have an abundant supply 2. or a scarce supply

utility

The amount of satisfaction one gets from a good or service Facts 1. utility is measured in numbers that are purely cardinal, rather than ordinal 2. useful for comparison

law of demand

The concept that people are normally willing to buy less of a product if the price is high and more of it if the price is low Facts 1. represented by movement along the demand curve 2. products price is on the vertical axis Beyond: The law of demand states that the quantity demanded of a good increases when its price falls and decreases when the price rises.

productivity

The degree to which resources are being used efficiently to produce goods and services Facts 1. It can be expressed as the ratio of output to inputs used in the production process 2. Outputs and inputs are defined in the total productivity measure as their economic values

demand

The desire, willingness, and ability to buy a good or service Facts 1. Items in high demand are usually produced in large amounts 2. If there is less of a demand the product might be more expensive. Beyond: The demand of a product determines the price and availability of a product.

technology

The methods or processes used to make goods and services Facts 1. improves efficiency in companies 2. produces goods in larger quantities, at a faster pace

profit

The money a business receives for its products or services over and above its costs Facts 1. normal profit is the minimum level of profit needed for a company to remain competitive in the market 2. Economic profit is the difference between total monetary revenue and total costs

equilibrium price

The price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy Facts 1. market equilibrium is a market state where the supply in the market is equal to the demand in the market 2. may also be defined as the point where supply equals demand for a product

law of supply

The principle that suppliers will normally offer more for sale at higher prices and less at lower prices Facts 1. Law of Supply is a positive relationship between quantity supplied and price and is the reason for the upward slope of the supply curve 2. the relationship between price and quantity demanded is known as the demand relationship

market demand

The total demand of all consumers for a product or service Facts 1. specifies the amounts of goods and services that will be purchased at all possible price levels. 2. there is a market demand curve

market supply

The total of all the supply schedules of all the businesses that provide the same good or service Facts 1. Supply represents how much the market can offer 2. When the supply and demand curves intersect, the market is in equilibrium Beyond: economic equilibrium is a state where economic forces such as supply and demand are balanced and in the absence of external influences the values of economic variables will not change

supply curve

Upward-sloping line that graphically shows the quantities supplied at each possible price Facts 1. Prices of relevant inputs causes shift in curve 2. if the cost of resources used to produce a good increases, sellers will be less inclined to supply the same quantity at a given price