Economics Supply & Demand
excise tax
A fee on the production of a good or service.
Black Market
"underground" or illegal market in which goods are traded at prices above their legal maximum prices
Law of Demand
All else held constant, as price for a good/service increases, the quantity demanded decreases.
Substitution
A factor affecting the demand for a good or service. Occurs when the price of an equal replacement changes.
subsidy
A government payment that helps a producer supply a product or service.
Price Ceiling
A legal maximum price that may be charged for a good or service
Price Floor
A legal minimum price below which a good or service may not be sold
Law of Supply
All else held constant, as the price of a good/service increases, the quantity supplied increases.
Demand Curve
DOWNWARD SLOPING LINE that shows quantity demanded at different prices on a graph
Demand curve shifts to the LEFT
Decrease in demand
Elasticity
Economic concept dealing with consumers or producers responsiveness to an increase or decrease in price of a product, in others words, HOW MUCH the quantity responds to price.
Demand curve shifts to the RIGHT
Increase in demand
causes of a shift in supply
Input costs, Number of sellers, government intervention, technology, labor productivity, producer expectations of a future price change
Inelastic Demand
Situation in which a product's price change has little impact on the quantity demanded by consumers
Elastic Demand
Situation in which the rise or fall in a product's price greatly affects the amount that people are willing to buy
Quantity Supplied
The amount of a good or service that a producer is willing and able to supply at a specific price
Quantity Demanded
The amount of goods or services a consumer is willing and able to purchase at one set price.
A shift in demand
The demand curve shifts moving the whole line to a different spot on the graph when some big change happens.
Rationing
The distribution of goods and services based on something other than price
Equilibrium Price
The price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy
A shift in supply
The supply curve shifts moving the whole line to a different spot on the graph when some big change happens
Surplus
Too much of a product at a price, occurs when the price is set too high
Supply Curve
UPWARD sloping line that shows on a graph the quantities supplied at each possible price
Market
Voluntary exchange of goods and services between buyers and sellers.
Normal good
When income increases, the demand for these types of items also increases.
Inferior good
When income increases, the demand for these types of items decreases.
A change in quantity demanded
a change in price moves quantity to a different spot on the curve
factors that affect supply elasticity
amount of skill, amount and cost of capital, ease of obtaining the resource, amount of time
factors that affect demand elasticity
availability of substitutes, ease of delaying the purchase (necessity or luxury), and % of income
labor productivity
efficiency of workers, usually increased through education and training
Causes of Shifts in Demand
market size, income changes, consumer tastes, substitutes, complementary goods, consumer expectations of a future price change
factors that affect supply elasticity
time, skill, capital and ease of obtaining resources
Supply
willingness and ability to offer a good or service for sale (at all prices)
Demand
willingness and ability to purchase a good or service (at all prices)
