question
Law of Demand
answer
1) There is an inverse relationship between price and quantity demanded.
2) An increase in price will decrease quantity demanded ceteris paribus. A decrease in price will increase quantity demanded ceteris paribus.
2) An increase in price will decrease quantity demanded ceteris paribus. A decrease in price will increase quantity demanded ceteris paribus.
question
Ceteris Paribus
answer
Latin phrase that means "all other things held constant"
question
Demand Function
answer
Mathematical relationship where quantity demanded is a function of price
question
Inverse Demand Function
answer
The mathematical function where price is a function of quantity demanded
question
Choke Price
answer
The price at which quantity demanded is equal to zero. The constant in an inverse linear demand curve.
question
Multivariable Demand Function
answer
Mathematical relationship between quantity demanded and the several variables that can affect it.
question
Change in Demand
answer
A rightward or leftward shift of the entire demand curve; caused by a change in something other than the price of the good.
question
Expansion of Demand
answer
Rightward shift of the demand curve
question
Contraction of Demand
answer
Leftward shift of the demand curve
question
Ceteris Paribus Conditions of Demand
answer
The following things must be held constant when changing the price of a good in a demand curve. If one of the things in this list changes, you must redraw the demand curve as a response
- Income
- Prices of related goods
- Everything else (Consumer Expectations, Number of Buyers, Tastes/Quality)
- Income
- Prices of related goods
- Everything else (Consumer Expectations, Number of Buyers, Tastes/Quality)
question
Normal Good
answer
A good that has the following characteristics: when consumers get richer demand expands; when consumers get poorer demand contracts
question
Inferior Good
answer
A good that has the following characteristics: when the price of Good A increases the demand for Good B contracts; when the price of Good A falls the demand for Good B expands
question
Substitutes
answer
A good that has the following characteristics: when the price of Good Y increases the demand for Good Z expands; when the price of Good Y falls the demand for Good Z contracts
question
Law of Supply
answer
1) There is a positive relationship between price and quantity supplied. 2) An increase in price will cause an increase in quantity supplied ceteris paribus. A decrease in price will cause a decrease in quantity supplied ceteris paribus.
question
Supply Function
answer
Mathematical relationship where quantity supplied is a function of price.
question
Inverse Supply Function
answer
Mathematical relationship where price is a function of quantity supplied.
question
Multivariable Supply Function
answer
Mathematical relationship between quantity supplied and the several variables that can affect it.
question
Change in Supply
answer
A rightward or leftward shift of the entire supply curve
question
Expansion in Supply
answer
Rightward shift of the supply curve
question
Contraction in Supply
answer
Leftward shift of the supply curve
question
Ceteris Paribus Conditions of Supply
answer
The following things must all be held constant when changing the price of a good in a supply curve. If one of the things in this list changes, you must redraw the supply curve as a response.
• Input Prices
• Production technology
• Everything else
- Producer Expectations
- Number of Sellers
• Input Prices
• Production technology
• Everything else
- Producer Expectations
- Number of Sellers
question
Input Price
answer
The price of a good that is used in the production of something else. When an input price into the production of good X goes up, the supply of good X contracts; when an input price into the production of good X goes down, the supply of good X expands
question
Shortage
answer
Occurs when quantity demanded is greater than quantity supplied.
question
Surplus
answer
Occurs when quantity supplied is greater than quantity demanded.
question
Equilibrium
answer
When there is no incentive to change behavior
question
Comparative Statics
answer
The economic analysis where you compare the original market equilibrium to the equilibrium that exists after some change in the market has occurred.
question
Price Gouging
answer
A pejorative term for when suppliers raise price above what is deemed "fair"
question
Speculation
answer
Buying and selling of goods today based on predictions of future market conditions. This buying and selling today can cause prices to change.
question
Elasticity
answer
A measure of responsiveness of one variable to a change in one of its determinants.
question
Own-Price Elasticity of Demand
answer
A measure of responsiveness of quantity demanded of good X to a change in the price of good X.
question
Own-Price Elasticity of Supply
answer
A measure of responsiveness of quantity supplied of good X to a change in the price of good X.
question
Perfectly Inelastic
answer
Change in price has no effect on quantity demanded (or supplied); e = 0.0
question
Inelastic
answer
The percentage change in quantity is smaller than the percentage change in price; 0.0 < |e| < 1.0
question
Unit Elastic
answer
A percentage change of price has brought about an equal percent change in quantity; |e| = 1.0
question
Elastic
answer
A percentage change in price has brought about a larger percent change in quantity; 1.0 < |e| < ∞
question
Perfectly Elastic
answer
Even a tiny change in price will bring about an infinite change in quantity demanded; |e| = ∞
question
Isoelastic Demand Curve
answer
Demand curve with a constant own-price elasticity
question
Expenditures and Revenues
answer
Price multiplied by quantity
question
Cross-Price Elasticity
answer
A measure of responsiveness of quantity demanded of good X to a change in the price of good Y; Negative sign will imply complements and a positive sign implies substitutes.
question
Income Elasticity
answer
A measure of responsiveness of quantity demanded of good X to a change in the incomes of consumers; Positive sign implies normal good and a negative sign implies inferior good.
question
Market Mechanism
answer
Tendency in a free market for
price to change until the market
clears.
price to change until the market
clears.
question
Cyclical Industries
answer
Industries
in which sales tend to magnify
cyclical changes in gross
domestic product and national
income.
in which sales tend to magnify
cyclical changes in gross
domestic product and national
income.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
