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?