Econ- unit 1 (ch 3 lesson 1-5 & 7)

Explain and interpret the elements of an individual and market demand schedule

-A demand schedule is a table that lists the quantity of a good that a person will purchase at various prices in a market.

Identify the factors that affect elasticity of demand

-Availability of Substitutes -Relative Importance -Necessities Versus Luxuries -Change Over Time

Explain how firms use elasticity and revenue to make decisions

A company's total revenue is defined as the amount of money the company receives by selling its goods. This is determined by two factors: the price of the goods and the quantity sold.The law of demand tells us that an increase in price will decrease the quantity demanded.

Identify how a demand schedule translates to a demand curve (graph)

A demand curve is a graphic representation of a demand schedule. All demand graphs show that each pair of price and quantity-demanded numbers on the demand schedule is plotted as a point on the graph. Connecting the points on the graph creates a demand curve.

Availability of Substitutes

If there are few substitutes for a good, then even when its price rises greatly, you might still buy it.

Explain how to calculate elasticity of demand

In order to calculate elasticity of demand, take the percentage change in the quantity of the good demanded, and divide this number by the percentage change in the price of the good. The result is the elasticity of demand for the good.

Explain how supply and demand create equilibrium in the marketplace

Jusssssssssssssssst righhhhhhhhhhhhhhhhhhhhht At equilibrium, the market for a good is stable. To find the equilibrium price and quantity, simply look for the price at which the quantity supplied equals the quantity demanded.

Explain how businesses decide how much labor to hire in order to produce a certain level of output

Owners have to consider how the number of workers they hire will affect their total production. They have to determine if hiring more workers is cost efficient and in the end increases or decreases the revenue.

Explain how a business chooses to set output

Revenue - total costs= profit To maximize profits, a business must identify the amount of labor that will enable the company to achieve the widest gap between revenue and costs.

Identify two ways that the government intervenes in markets to control prices and restricts the use of individual property

The government can impose a price ceiling, or a maximum price that can be legally charged for a good or service. The price ceiling is set below the equilibrium price. Rent control limits price increases for rental housing. Minimum wage

Summarize how the law of demand explains the effects of price on the quantity demanded

The law of demand says that when a good's price is lower, consumers will buy more of it. When the price is higher, consumers will buy less of it.Demand is the desire to own something and the ability to pay for it. To have demand for a good or service, both of these conditions must be present.

Identify the factors that a firm must consider before shutting down an unprofitable business

There are times when keeping a money-losing factory open is the best choice. The firm should keep the factory open if the total revenue from the goods the factory produces is greater than the cost of keeping it open. the benefit of operating the facility is greater than the variable cost, so it makes sense to keep the facility running.

Identify the non-price determinants that create changes in demand and can cause a shift in the demand curve

They are factors that can lead to the shifting of demand up or down. Non-price determinants include income, consumer expectations, population, demographics, and consumer tastes and advertising.

Explain the relationship between elasticity of supply and time

Time is the key factor in determining whether the supply of a good will be elastic or inelastic.

Necessities Versus Luxuries

Whether a person considers a good to be a necessity or a luxury has a great impact on a person's elasticity of demand for that good.

an individual supply schedule

a supply schedule shows the relationship between price and quantity supplied for a specific good or service, or how much of a good or service a supplier will offer at various prices.

Substitutes

goods that are used in place of one another.

income effect

has led to a decrease in the quantity demanded or if the price goes down then you would buy more.

market demand schedule

shows the quantities demanded at various prices by all consumers in the market.

substitution effect

takes place when a consumer reacts to a rise in the price of one good by consuming less of that good and more of a substitute good.

an individual demand schedule

tells the price at which a person's "quantity of demand" is met.

Equilibrium

the point of balance at which the quantity demanded equals the quantity supplied.

Complements

two goods that are bought and used together.

Describe how the substitution effect and the income effect influence decisions

-The substitution effect and the income effect describe two different ways that a consumer can change his or her spending patterns.

Summarize the production costs of a business

A fixed cost is a cost that does not change, no matter how much of a good is produced. Most fixed costs involve the property or production facility. Variable costs are costs that rise or fall depending on the quantity produced. They include the costs of raw materials and some labor.

market supply schedule

A market supply schedule shows the relationship between prices and the total quantity supplied by all firms in a particular market.

Summarize the impacts of prices ceilings and price floors on the free market

A price ceiling is a maximum price, set by law, that sellers can charge for a good or service. A price floor is a minimum price, set by government, that must be paid for a good or service. Many farmers in the United States rely on price supports or other government programs.

Relative Importance

A second factor in determining a good's elasticity of demand is how much of your budget you spend on the good.

Explain the difference between a change in the quantity demanded and a shift in the demand curve

A shift in the demand curve means that at every price, consumers buy a different quantity than before. This shift of the entire curve is what economists refer to as a change in demand.

Summarize how the law of supply explains the effects of price on the quantity supplied

According to the law of supply, producers offer more of a good or service as its price increases and less as its price falls. Economists use the term quantity supplied to describe how much of a good or service a producer is willing and able to sell at a specific price.

Describe what happens to prices, quantities demanded, and quantities supplied when equilibrium is disturbed

Disequilibrium occurs when quantity supplied is not equal to quantity demanded in a market. Disequilibrium can produce one of two outcomes: shortage- rise the price or surplus- decrease the price. Anything else

Summarize examples of how a change in demand for one good can affect demand for a related good

Exapmle:When we consider the demand for skis, ski boots are considered a complement. An increase in the price of ski boots will cause people to buy fewer boots. Because skis are useless without boots, the demand for skis will fall at all prices—after all, why buy new skis if you can't afford the ski boots you need?