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When the price of Milky Ways increase, consumers increase purchases of snickers whos prices are now relatively lower. This statement describes :
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Substitution effect
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The Law of Demand States:
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Price and QD are inversely related
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An increase in QD means:
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price has declined & consumers therefore want to purchase more of the product.
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Which of the following will cause a “decrease in QS” for computers?
answer
decrease in price of computers
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Which of the following will cause an “increase in QS” for DVD players?
answer
decrease in the resource cost of DVD players
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Which of the following will cause an “increase in demand” for digital cameras (Normal Good)?
answer
increase in incomes
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When the price of a product falls, the purchasing power of our money income rises and thus permits us to purchase more of a product This statement describes:
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Income Effect
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Which of the following will cause a “decrease in demand” for scanners?
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Decrease in # of Consumers(Market Size)
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The law of supply indicates that:
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producers will offer more of a product at high prices than they will at lower prices
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The relationship between QD & Price is _____________ & the relationship between QS & Price is ___________.
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inverse, direct
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Which of the following will cause a “decrease in supply” of computers?
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producer expectations of computer price increases
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demand
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combination of quantities that someone would be willing and able to buy over a range of possible prices at a given moment
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incentive
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something that motivates
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Law of Demand
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rule stating that more will be demanded at lower prices and less at higher prices; an inverse relationship between price and quantity demanded
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diminishing marginal utility
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decrease in additional satisfaction or usefulness as additional units of a product are acquired
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change in quantity demanded
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movement along the demand curve showing that a different quantity is purchased in response to a change in price
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substitution effect
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the portion of a change in quantity demanded that is due to a change in the relative price of the good
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complements
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products that increase the use of other products; products related in such a way that an increase in the price of one reduces the demand for both
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income effect
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that portion of a change in quantity demanded caused by a change in a consumer’s income when the price of a product changes
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elasticity
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a measure of responsiveness that tells us how a dependent variable, such as quantity demanded or quantity supplied, responds to a change in an independent variable, such as price
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unit elastic
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elasticity where a change in the independent variable (usually price) generates a proportional change of the dependent variable (quantity demanded or supplied)
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supply
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amount of a product offered for sale at all possible prices in a market at a given point in time
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Law of supply
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principle that more will be offered for sale at higher prices than at lower prices
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change in quantity supplied
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change in the amount offered for sale in response to a price change; movement along the supply curve
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diminishing returns
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stage of production where output increases at a shrinking rate as more units of variable input are added
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marginal revenue
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extra revenue from the sale of one additional unit of output
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price
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the monetary value of a product.
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surplus
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situation where quantity supplied is greater than quantity demanded at a given price.
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shortage
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situation where quantity supplied is less than quantity demanded at a given price.
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price ceiling
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the highest legal price that can be charged for a product.
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price floor
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the lowest legal price that can be paid for a product.
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