Economics Chapter 4 and 5

List the factors that Shift Demand

1. Taste and Preferences 2. Income 3. Expectations 4. The Number of Buyers

Requires more firms to use more inputs to produce any give quantity of their goods then the supply curve shifts left.

National Disasters and Weather

A change in the amount people are willing and able to buy at every price.

Shift Of The Demand Curve

The result of a change in the quantity supplied at every price not to be confused with a movement along the supply curve, which is a result in the change of price.

Shift Of The Supply Curve

It is the result of a change in the quantity supplied at every price, not to be confused with a movement along the supply curve, which is the result of a change in the price.

Shift of the supply curve

Two goods for which an increase in the price of one of the goods leads to an increase in the demand for the other.

Substitutes

The change in consumption that arises when an increase in the price of a good causes a consumer to switch away from that good and toward other goods that do not experience in a price increase. Likewise a decrease in the price of a good causes consumers to switch toward that good.

Substitution Effect

A graphical representation of the supply schedule showing the quantity the firm will supply at each price.

Supply Curve

A grapical representation of the supply schedule showing the quantity a firm will supply at each price.

Supply Curve

A table listing the quantity of a good that will be supplied a specified prices.

Supply Schedule

Unit Elastic

Supply is moderately sensitive to price changes; (fresh fish) equal to 1.0 (elasticity value)

Inelastic

Supply is not very sensitive to price changes (gold, houses) less than 1.0

Elastic

Supply is very sensitive to price changes; (t-shirt, cookies) elasticity value is greater than 1.0

What happens to the demand for milk if the price of cereal drops?

demand decreases

Name an example of an elastic good.

diamonds, iphone

If the price of a good changes and the demand drops, what is the elasticity of this good?

elastic

What is the elasticity for luxury items?

elastic

What does an elasticity calculation of 2.5 determine about a good?

elastic (greater than 1 is elastic)

What happens to the supply of paper if the cost of wood pulp increases?

supply increases

A shift of the demand curve

represents a change in the amount people are willing and able to buy at every price

What does an elasticity calculation of 1 determine about a good?

unit elastic

List the factors that shift supply

1. Cost of inputs 2. Government policies 3. Taxes 4. Regulation 5. Subsidies 6. The number of firms

Subsidies

A payment made by the government to support a particular activity or goods.

The Law of Demand

All else equal, the quantity demanded of a good increases when its price falls and vice-versa.

What is the Law of Supply?

An increase in the price of a good leads to an increase in the quantity supplied.

The Substitution Effect

Arises when an increase in th eprice of a good causes a consumer to switch away from that good and toward other goods that do not experience a price increase.

A grapical representation of how the quantity demanded by all consumers in the market varies with the price.

Market Demand Curve

A graphical representation of the quantity supplied by all firms in the market at various prices.

Market Supply Curve

Government Policies

Can change the cost of producing a good, or they can change the amount of money suppliers, receive for selling the goods

"All else equal"

Ceteris Paribus

A shift of the demand curve (not to be confused with a change in quanity demand).

Change In Demand

A shift in the supply curve.

Change In Supply

A movement along the supply curve.

Change In THe Quantity Supplied

A movement along a demand curve caused by a price change (not to be confused with a change in demand).

Change In The Quantity Demanded

Two goods for which an increase in the price of one of the goods leads to a decrease in demand for the other good.

Complements

A geographical representation of the demand schedule for a good, shoing the quantity demanded aat each price.

Demand Curve

A graphical representation of the demand schedule for a good, showing the quantity demanded of each price.

Demand Curve

A table that relates the quantity demanded of a particular good to its price.

Demand Schedule

A table that relates to the quantity demanded of a particular good to its price.

Demand Schedule

The Individual Demand Curve

Demand Schedule, Demand Curve

The decrease in the marginal product of a variable input, such a labor, as more and more of it is combined with a fixed input, such as equipment.

Diminishing Marginal Productivity

The amount by which total output increases which one more worker is hired.

Marginal Product Of Labor

The additional revenue a firm receives from selling another unit of output.

Marginal Revenue

The Law of Demand and the "All Else Equal Assumption"

Economist use the latin term "ceteris Paritous" meaning all else equal, to indicate that they are looking only at a specified relationship, such as the one between price and quantity demanded.

Consumers respond to a change in price with a relatively large change in the quantity demanded.

Elastic Demand

A measure of how strongly consumers respond to a change in the price of a good, calculated as the percentage change in the quantity demanded divided by the percentage change in the price.

Elasticity Of Demand

A measure of the responsiveness of the quantity supplied to price changes, calculated by dividing the percentage change in the quantity demanded divided by the percentage change in price.

Elasticity Of Supply

Expectations that the price will rise in the future causes the todyay's supply curve to shift to the left. If the price falls it will shift to the right.

Expectations about the Future Prices

The cost of inputs that do not vary with the amount of output produced.

Fixed Cost

Taxes

Government raises tax revenue to pay for national defense schools, roads and other vital services

The Number of Firms

If the number of firms that produce a good increases, supply will increase as well.

Perfect Competition

In a market when there are many firms selling identical goods, firms are free to enter and exit the market and consumers have full information about the price and availability of goods.

Consumers respond to change in price with a relatively small change in the quantity.

Inelastic Demand

A good for which the demand falls when income rises and rises when income falls.

Inferior Good

What is quantity demanded?

It is the amount of a good that consumers are willing and able to purchase at a particular price over a given time.

The Cost of Inputs

It is the result of a change in the quantity supplied at every price, not to be confused with a movement along the supply curve which is the result of a change in the price.

What is Law of Demand?

It is the tendency for the price and quantity demanded to move in opposite directions.

There is a general tendency for output to increase at a decreasing rate when additional amounts of an input are used in production holding the amount of other inputs constant.

Law Of Diminishing Returns

The tendency for the price and the quantity demanded to move in opposite directions.

Law of Demand

An increase in the price of a good leads to a increase in the quantity supplied.

Law of Supply

A good for which the demand rises when income rises and falls when income falls.

Normal Good

The market condition in which there are many firms selling identical goods, firms are free to enter and exit the market, and consumers have all information about the price and availability of goods.

Perfect Competiton

Regulations

Place restrictions on firms and individuals

The total revenue a firm receives from selling its products minus the total cost of producing it.

Profit

The amount of output that gives a firm as much profit as possible.

Profit-Maximizing Output Level

It is the amount of a good that consumers are willing and able to purchase at a particular price over a given period of time.

Quantity Demanded

The amount of a good that consumers are willing and able to purchase at a particular price within a given period of time.

Quantity Demanded

The amount of a good that firms are willing to supply at a particular price over a given period of time.

Quantity Supplied

What causes the Demand Curve to Shift?

Tastes, income, the price of related good, expectations, the number of buyers.

Refers to the methods used to create goods and services from inputs. At any price for the good, firm will want to produce more than before. This causes the supply curve to shift rightward.

Technological Change

An increase in the price of a good leads to an increase in the quantity supplied.

The Law of Supply

For a good is a geographical at representation of how the quantity demanded by all consumers in the market varies with the price.

The Market Demand Curve

Is a graphical representation of the quantity supplied at various prices by all firms in the market.

The Market Supply Curve

The amount of a good or service that firms are willing to supply at a particular price over a given period of time.

The Quantity Supplies

For a good is a table listing the quantity of the good that will be supplied at specified prices.

The Supply Schedule

What are the factors that shift the Supply Curve?

The cost of inputs Government policies Taxes Regulations Subsidies The number of firms Technological Change National Disasters and Weather Expectations about future prices

The change in consumption that occurs when a price increase causes consumers to feel poorer or when a price decreases causes them to feel richer.

The income effect

Fixed costs plus variable cost.

Total Cost

All the money consumers spend on a good, and firms receive for a good, during a particular period of time: it is the price of the good multiplied fy the quantity of the good sold.

Total Revenue

Consumers respond to a change in price by decreasing the quantity demanded by the same percentage.

Unit-Elastic

The cost of inputs that do vary with the amount of output produced.

Variable Cost

Movements along a Demand Curce movement

along a demand curve caused by a price change is called a chang ein the quantity demanded, not to be confused with a change in demand.

What is the elasticity for needs?

inelastic

What does an elasticity calculation of .34444 determine about a good?

inelastic (less than one is inelastic)

Name an example of an inelastic good.

life saving medication, gas