Econ 101 Ch. 2-3 Demand & Supply

Ace your homework & exams now with Quizwiz!

To find market demand curve,

Survey each customer to find their individual demand curves. For each price, add up the quantities that the individuals are willing to buy. Scale the total quantity up so that it would represent the entire population. For each price, plot the total quantity demanded by the entire population.

Price-Taker

someone who charges at the market price and whose actions do not affect the market price

Interdependence Principle

supplier's choice depends on other factors

Law of Demand

tendency for quantity demanded to be higher when price is lower

Law of Supply

tendency for quantity supplied to be higher when price is higher

Rational Rule for Sellers

to maximize your profits. Keep applying the rule and producing until price = marginal cost.

Business Productivity and Technology

when businesses figure out how to produce more at a lower cost, supply increases

Decrease Supply

shift of supply curve to left

Increase in Supply

shift of supply curve to right

Input Prices

a change in price of inputs will cause a change in price of final products and will cause a shift in supply curve

Individual Supply Curve

a graph plotting the quantity of an item that a business plans to sell at each price; upward sloping; represents marginal cost curve

Market Demand Curve

a graph plotting the total quantity of an item demanded by the entire market, at each price

Market Supply Curve

a graph plotting the total quantity of an item supplied by the entire market, at each price

Individual Demand Curve

a graph that shows the quantity of an item that someone plans to buy at each price; always downward sloping; represents marginal benefits

Price changes cause

a movement along a demand curve. They do not shift the demand curve.

Shift in the Demand Curve

a movement of the demand curve itself

Movement Along Supply Curve

a price change causes movement from one point on a fixed supply curve to another point on same curve

Decrease in Demand

a shift of the demand curve to the left

Increase in Demand

a shift of the demand curve to the right

Substitutes-In-Production

alternative uses of your resourses; your supply of a good will decrease if the price of a substitute-in-production rises

The Rational Rule for Buyers

buy one more item if marginal benefit of one more is greater or equal to the price

Change in Quantity Supplied

change in quantity associated w movement along a fixed supply curve

Fixed Cost

costs that don't vary when you change the quantity of output you produce (e.g. monthly rent)

Variable Costs

cots that vary w the quantity of output you produce

Diminishing Marginal Benefit

each additional item yields a smaller marginal benefit than the previous item

Complements-In-Production

goods that are made together; your supply of a good will decrease if the price of a complement-in-production rises

Expectations

if a seller expects the price of a product to rise next year, they will store the product (decrease the supply) until next year

The Type and Number of Sellers

if businesses enter market, supply increases

Six Factors Shifting the Demand Curve

income (normal v inferior goods), preferences, prices of related (complementary v substitute goods), expectations, congestion and network effect, type and number of buyers

Choosing the Best Quantity to Supply

marginal, cost-benefit, opportunity cost, interdependence principle

Perfect Competition

markets in which 1) all firms in an industry sell an identical good; and 2) there are many buyers and sellers, each of whom is small, relative to the size of the market

Shift in Supply Curve

movement of supply curve itself


Related study sets

Microbiology Chapter 13 Problem Set

View Set

Managing and Behavior Chapters 1

View Set

McCance Chapter 2 - Altered Cellular and Tissue Biology

View Set

Adult Health Exam 4 Arthritis and Connective Tissue Diseases Ch. 69

View Set