Supply and Demand Test- notes and vocab

Supply
The amount of a product that would be offered for sale at all possible prices that could prevail in the market
Law of supply
The principle that suppliers will normally offer more for sale at high prices and less at lower prices
Supply schedule
A listing of the various quantities of a particular product supplied at all possible prices in the market
Supply curve
A graph showing the various quantities supplied at all possible prices that might prevail in the market at any given time
Market supply curve
The supply curve that shows the quantities offered at various prices by all firms that offer the product for sale in a given market

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Quantity supplied
Amount producers bring to market at any given price
Change in quantity supplied
The change in amount offered for sale in response to change in prices
Change in supply
A situation where suppliers offer different amounts of products for sale at all possible prices in the market
Subsidy
A government payment to an individual, business, or other group to encourage or protect a certain type of economic activity
Supply elasticity
A measure in the way in which the quantity supplied responds to a change in price
Production function
A figure that shows how total output changes when the amount of a single variable input changes while all other inputs are held constant
Short run
A period so brief that only the amount of the variable input can be changed
Long run
A period long enough for the firm to adjust the quantities of all productive resources, including capital
Total product
Total output produced by the firm
Marginal product
The extra output or change in total product caused by adding one more unit of variable input
Stages of production
Increasing returns, diminishing returns, and negative returns
Diminishing returns
The stage where output increases at a diminishing rate as more variable inputs are added
Fixed costs
The costs that an organization incurs even if there is little or no activity
Overhead
Fixed costs
Variable costs
Costs that change when the business’s rate of operation or output changes
Total costs
Sum of the fixed and variable costs
Marginal costs
The extra cost incurred when producing one more unit of output
E-commerce
An electronic business conducted over the Internet
Break – even point
When a business can find a level of production that generates enough revenue to cover its total operating costs
Total revenue
All the revenue that a firm receives
Marginal revenue
The extra revenue a business receives from the production and sale of one additional unit of output
Marginal analysis
A type of decision making that compares the extra benefits of an action to the extra costs of taking actions
Profit maximizing quantity of output
When the marginal cost and marginal revenue are equal
Demand
The desire, ability, and willingness to buy a product
Microeconomics
Part of the economic theory that deals with behavior and decision-making by individual units
Market economy
When people and firms act in their own best interest to answer the basic what, how, and for whom questions
Demand schedule
Shows the various quantities demanded of a particular product at all prices that might prevail in the market at any given time
Demand curve
A graph showing the quantity demanded at each and every price that might prevail in the market
Law of demand
States that the quantity demanded varies inversely with its price
Market demand curve
The demand curve that shows the quantities demanded by everyone who is interested in purchasing the product
Marginal utility
The extra usefulness or additional satisfaction a person gets from acquiring or using one more unit of product
Diminishing marginal utility
Principle which states that the extra satisfaction we get from using additional quantities of the project begins to decline
Change in quantity demanded
change that is graphically represented as a movement along the demand curve
Income effect
The change in quantity demanded because a change in price that alters consumers real income
Substitution effect
A change in the quantity demanded because of the change in the relative price of the product
Change in demand
When factors change but the price stays the same
Substitutes
Products that can be used in the place of other products
Complements
Goods that are related. Because the use of one increases the use of other
Elasticity
A general measure of responsiveness. An important cause and effect relationship in economics
Demand elasticity
The extent to which a change in price causes a change in the quantity demanded
Elastic
When a given change in price causes a relatively larger change in the quantity demanded
Inelastic
When a given change in price causes a relatively smaller change inequality demanded
Unit elastic
When a given change in price causes a proportional change in quantity demanded
Competitive market
When many buyers and sellers each have a negligible effect on price
What is a perfectly competitive market?
All goods are exactly the same and buyers and sellers are so numerous that no one can affect market price. Each is a price taker
What does a demand curve look like?
It starts at the top left and go down to the bottom right
What is the sum of quantities demanded by all buyers at each price?
Quantity demanded
As quantity demanded changes, what does it do to the curb?
Causes movement
What does the demand curve show
Her price affects quantity demanded
What are the curve shifters of demand and how did they change the graph?
1.# of buyers-shifts
2.income- shifts
3.price of related goods-shift
4.tastes-shift
5.expectations-shift
6.price-movement
2 goods are substitutes if what?
If an increase in the price of one results in an increase in demand for the other
2 goods are complements if what?
If an increase in the price of one causes a fall in demand of the other
In the law of supply, if the price goes up, what happens to the quantity supplied?
It goes up too
Is the relationship between price and quantity supplied negative or positive?
Positive
Describe what a supply curve looks like
It starts at the bottom left and goes up towards the right
What is the quantity supplied
The amount of Any good that sellers are willing to sell
What does the law of supply state?
The claim that the quantity supplied of a good rises when the price of the good rises
If the curve rises=____
If the curve falls=______
Supply
Demand
What are the supply curve shifters and how do they affect the curb?
1.input prices-shift
2.technology- shift
3.#of sellers- shift
4.expectations- shift
5. Price of related goods-shift
If the price of inputs goes up, what happens to supply?
It goes down
If the price of related goods goes up, what happened to supply?
It goes down
If the number of suppliers goes up, what happens to supply
It goes up
If technology goes up, what happened to supply?
It goes up
Expected future prices rise, what happens to supply
It goes down because they hoard it and sell it later
What is equilibrium
A price that is reach the level when quantity supplied equals quantity demanded
What is surplus?
When quantity supplied is greater than quantity demanded
What are the three steps to analyze changes in equilibrium
1. Decide if the event shifts supply curve, demand curve, or both
2. Decide which direction the curve shifts
3.use the supply/demand diagram to see how the shift changes equilibrium, price, and quantity
What are the shifters for the supply/demand curve? How do they affect the curb
1. Change in supply- shifts S curve
2. Change in QS-movement along S Curve
3.change in demand-shift in D curve
4.change in QD-movement along fixed d curve
To say that the quantity demanded of a good is negatively related to the price of the good is to say that what?
An increase in the price of the good leads to the decrease in the quantity demanded of a good
The negative relationship between price and quantity demanded applies to ___, is represented by____, and is referred to as _____
Most goods in the economy
By a downward slope demand curve
Law of demand
Which of the following would not be a determinant of the demand for a particular good?
-a-prices of related goods
-b- income
-c-tastes
-d-The prices of the inputs used to produce the goods
D
It’s a good is normal, then an increase in income will result in what?
An increase in the demand for the good
If Francis experiences a decrease in his income, we would expect that, as a result, Francis’ demand for normal goods will
Decrease
Currently you purchased six packages of hot dogs a month. You will graduate from college in December and you will start a new job in January. You have no plans to purchase hotdogs in January. For you, hot dogs are what type of good?
An inferior good
Two goods are substitutes of a decrease in the price of one good ____the demand of another
Decreases
Two goods are complements if I decrease in the price of one good_____ the demand for another
Increases
A likely example of complementary goods for most people would be
Hamburgers and french fries
A likely example of a substitute good for most people would be
Pencils and pens
Supposed today people change their expectations about the future. This change and expectations can affect what?
Today’s demand
You love peanut butter. You hear on the news that 50% of the peanut crop is the South has been wiped out by a drought, and this will cause the price of peanuts to double by the end of the year. As a result, your demand for peanut butter does what?
Increases today
Ford Motor Company and houses they will offer $3000 rebates on new mustangs starting next month. As a result of this information, today’s demand curve for mustangs shifts to the____
Left
Suppose you want to make pies build with banana cream and vanilla pudding. You notice the price of bananas has increased. How does price affect your demand for vanilla pudding?
It would decrease
Which of the following demonstrates the law of demand?
A) relative to last month, John buys more pretzels at $1.50 per pretzel since he got a raise at work this month
B)Melissa buys you were muffins at $.75 per month and then at one dollar per muffin, other things equal
C) Dave buys more donuts at $.25 per donut then it $.50 per donut, other things equal
D)Kendra Buys we were snickers at $.60 per snickers since the price of Milky Way’s fell to $.50 per Milky Way
C
A higher price for batteries would result in a _____ in the demand for flashlights
Decrease
A table that shows the relationship between the price of the good and the quantity demanded of that good is called what?
Demand schedule
When constructing a demand curve, what is on the vertical axis and what is on the horizontal?
V-price
H-QD
When we move along a given demand curve, all nonprice determinants of demand are held____
Constant
If the number of buyers in the market decreases, market demand will____
Decrease
Supposed Spencer and Kate are the only two demanders of lemonade. Each month, Spencer by six glasses of lemonade when the price is one dollar per glass, and he buys for glasses when the price is 150 per glass. Each month, Kate buys for glasses of lemonade when the price is one dollar per glass, and she buys two glasses when the price is 150 per glass. Which of the following points is on the market demand curve?
A-QD=4 price=$2.50
B-QD=16 peice=$2.50
C-QD=3 price =$1.50
D-QD=10 price=$1.00
D
How is an increase in demand represented on a demand curve?
rightward shift
Pizza is a normal good if the demand for pizza____ when income rises
Rises
Today’s demand curve for gasoline should shift in response to what?
A change in the expected future price of gasoline
Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart out your. We would expect the current demand for razors to_____
Increase
Suppose that sign just prove evidence to be a fact that chocolate pudding increase his cholesterol. We would expect to see a decrease in the demand for what?
Chocolate pudding
If buyers today become more willing and able them afford to purchase a larger quantities of the Nella Coke at each price of the Nella Coke, the demand for vanilla Coke will shift to the___
Right
When the price of a good or service changes, what happens to the demand curve
There is movement
Suppose that Carolyn receives a pay increase, we would expect her demand for inferior goods to_____
Decrease
A very hot summer and Atlanta will cause the demand for jackets to do what?
Decrease
Warrensburg is a small college town in Missouri. At the end of each August, they marketdemand for fast food does what?
Increases
An increase in the number of college scholarships issued by private foundations would ____ the demand for education
Increase
The demand curve for textbooks shifts when a determinant of the demand for textbooks other than the price of textbooks does what?
Changes
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