Econ Alive Chapter 5
the demand curve for the other good to shift
A change in the price of one product in a pair of substitute goods can cause what?
Law of diminishing marginal utility
A consumer sometimes has to decide whether or not to buy something
Elasticity of demand
A measure of consumer sensitivity to price changes
elasticity of demand
A measure of consumers' sensitivity to a change in price
an increase in price with an increase in quantity supplied
A producers whose supply is elastic will likely respond to a what?
yes and no
Are the inputs needed at the beginning of the supply chain readily available?
Demand for products that have close substitutes tends to be elastic
Availability of substitutes
total revenue
Calculated by multiplying the quantity of a good soldy by the price of the good
Other-things-being-equal, assumption
Ceteris Paribus
change in the market supply if a product
Change in the cost of a factor of production-land, labor, capital will result in a ________________
can cause market demand to shift
Changes in the number of consumers
expectation of a price change
Consumers may decide to buy or not to buy based on the what?
supply
Decrease in production costs increase what?
opposite effect
Expectations that future prices will fall leads to the what?
revenue
Firms earn profits based partly on what?
incentive to produce more
Higher profits create a what?
Depends on what you want to buy
How sensitive are you to price changes?
supply chain
Is the network of people organizations, and activities involved in supplying goods and services to consumers
market demand
Is the sum of all individuals quantities demanded in a market
Individual demand schedule
Lists the quantities of a good that one person will buy at various prices
profits
Lower production costs increases what?
supply
Natural disasters can decrease ________
Unitary elastic demand
Occurs when the percentage change in price exactly equals the percentage change in quantity demanded
a change in quantity demanded
Only a change in price causes what?
consumers to change their behavior
Prices don't have to rise or fall to cause what?
production levels
Producers are motivated to increase what?production levels in the hope of making higher profits
expectation that prices will rise or fall
Producers make supply decisions based on the what?
short term
Producers supply more to the market in the_______ _________
demand curve
Shows the relationship between price and the quantity that buyers are willing and able to buy
change in demand
Sometimes a factor other than price- such as a spike or a drop in the number of customers- causes an entire demand curve to shift to a new position on the graph
labor needed to produce a good
Technological advances can reduce the amount of what?
quantity demanded
The amount of a good or service that consumers are willing and able to buy at a specific price
Mobility of inputs
The ease with which inputs and products move through the supply chain also affects elasticity
price, quantity
The inverse relationship between _______ and _________ demanded is so strong
original market supply data
Used to plot the supply curve in the middle
highly inelastic
When a product is a necessity, demand for it tends to be ___________
left
When supply decreases, the supply curves shifts to the ____
right
When supply increases, the supply curve shifts to the _______
new firms may enter a market
When the price of a good or service increases, what happens?
production decisions by existing producers, and market entries and exits
Why do price and quantity supplied move in the same direction?
The following factors help economists predict the elasticity of demand for a good or service
Why is consumer demand more elastic for some goods than for others?
Several factors can influence the elasticity of supply at different points in the supply chain
Why is the supply of some goods elastic and other goods inelastic?
subsidy
a cash payment aimed at helping a producer to continue to operate
elasticity of supply
a measure of producers' sensitivity to price changes
elasticity
a measure of the degree to which the quantity demanded or supplied of a good or service changes in response to a change in price.
complementary good
a product that is used or consumed jointly with another product. Such a good usually has more value when paired with its complement than when used separately.
supply schedule
a table that shows the quantities supplied at different prices in a market
Excise tax
a tax on the manufacture or sale of a good
shaping consumer preferences
advertising can play a powerful role in what?
First developed the idea that demand is elastic more than a century ago, elasticity
alfred marshall
law of demand
an economic law stating that as the price of a good or service increases, the quantity demanded decreases, and vice versa. Generally, consumers are happier to buy goods and services at lower prices than at higher prices.
law of supply
an economic law stating that as the price of a good or service increases, the quantity supplied increases, and vice versa. Generally, producers are happier to offer goods and services at higher prices than at lower prices.
Change in quantity demanded
an increase of decrease in quantity demanded(the amount of a good or service that consumers are willing and able to buy at a specific price) as a result of a change in price
quantity supplied increases
as price increases
quantity supplied decreases
as the price decreases
up, down
as the prices change, the quantity demanded moves ______ or _______ along the demand curve
profits
bringing in more revenue is likely to increase what?
increases people's demand for goods and services(vice versa)
change in income
changes in price when buying "big ticket" items
consumers are more responsive to what?
products
consumers don'y buy the same what year after year?
a music album at a particular price
ex. of Law of diminishing marginal utility
demand shifters
factors that cause a change in demand
responds slightly or not at all to change in price
how does inelasticity respond?
the delivery of needed inputs to the producer
how does the supply chain begin?
the distribution of the finished product to consumers
how does the supply chain end?
the way quantity demanded responds to changes in price
how is elasticity used?
gauge the impact of prices on their revenue
how is the total revenue test used?
supply of the product based on those inputs will probably be elastic
if the inputs are needed at the beginning of the supply chain readily available what happens?
not be able to continue to buy the same quantity as they did at the original price
if the price of a good or service increases they they will do what?
demand
is the amount of a good or service that consumers are willing and able to buy at all prices in a given period
same direction
price and quantity moves in what direction?
supply curve
shows the relationship between the price and the quantity that producers are willing and able to supply
costs and productivity
technological advances lowers and increases what?
quantity supplied
the amount of a good or service that producers are willing and able to offer for sale at a specific price
revenue
the amount of money a firm receives in the course of doing business. Revenue is calculated by multiplying the quantity sold by the price.
Because of scarcity, people's incomes are limited
the income effect
supply
the quantity of a good or service that producers are willing and able to offer for sale at various prices.
Two different goods can satisfy the same want
the substitution effect
market supply
the sum of all producers' willingness and ability to supply
willingness, ability
what are the 2 characteristics of consumers?
substitution goods
what are the two different goods can satisfy the same want?
change in demand for a good or service
what can demand shifters cause?
the possible prices for a given period
what does a revenue table list?
quantity supplied moves in the same direction as price
what does the law of supply tell us?
decrease in quantity supplied at every price
what does the supply curve on the left show?
increase in quantity supplied at every price
what does the supply curve on the right show?
per day or per week
what is demand expressed in terms of a time frame?
price
what is the only factor that causes a change in quantity supplied?
demand
what is the result when the quantities demanded at all the various prices at which a good is sold are added together?
when quantities demanded increase or decrease at all prices
when does a change in change in demand happen?
increase their production of goods
when prices increase, the desire to make a profit leads producers to do what?
a profit before prices decrease
when producers supply more to the market in the short term, hoping to make a what?
making higher profits
why are producers motivated to increase production levels in the hope of what?
They see potential for profit
why do firms enter a market when the price of a good or service increases?