Mcgraw Hill Microeconomics – Chapter 3

There is an inverse relationship between price and quantity demanded

A change in the quantity demanded of a product that results from the change in real income (purchasing power) caused by a change in the product's price.

When a good can be substituted. If direct substitute good has a higher price, people will start buying the cheaper substitute good and vice versa.

A good or service whose consumption increases when income increases and falls when income decreases, price remaining constant.

A good or service whose consumption declines as income rises, prices held constant.

Products and services that are used together. When the price of one falls, the demand for the other increases (and conversely).

A movement of an entire demand curve or schedule such that the quantity demanded changes at every particular price; caused by a change in one or more of the determinants of demand.

A change in the quantity demanded along a fixed demand curve (or within a fixed demand schedule) as a result of a change in the price of the product.

MU decreases exponentially for every unit consumed

-Change in consumer taste or preference, change in number of buyers, or change in income.
-Change in consumer expectations (future prices or income
-Change in prices of complementary or substitute goods

A schedule or curve that shows the various amounts of a product that consumers are willing and able to buy as a series of possible prices during a specified time

A schedule or curve that shows the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.

The principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and conversely for a price decrease.

upwards sloping, exponentially increasing, positive/direct relationship with price

- resource prices
- technology
- taxes and subsidies
- prices of other goods*
- producer expectations*

* given their own flashcard

- If the price of another good that the producer could produce with the same resources rises, the supply decreases for the product the producers are currently producing.
- If the price of another good that the producer could produce with the same resources falls, the supply increases for the product the producers are currently producing.

- Prices higher in the future, supply decreases (to capitalize on future opportunity)
- Prices lower in the future, supply increases (to capitalize on current opportunity)

an institution or mechanism that brings buyers and sellers into contact

the ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent

The production of a good in the least costly way; occurs when production takes place at the output at which average total cost is a minimum and marginal product per dollar's worth of input is the same for all inputs.

A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it

A legal maximum price set for a good that is below equilibrium, often results in a shortage. Intended to protect low income consumers

Legal minimum price that a good can be sold at put above equilibrium, often results in surpluses. Intended to protect unprofitable industries

Equilibrium Price: Decrease
Equilibrium Quantity: Indeterminate

Equilibrium Price: Increase
Equilibrium Quantity: Indeterminate

Equilibrium Price: Indeterminate
Equilibrium Quantity: Increase

Equilibrium Price: Indeterminate
Equilibrium Quantity: Decrease

The price that balances quantity supplied and quantity demanded

The price where the intentions of the buyers and sellers match

the quantity supplied and the quantity demanded at the equilibrium price

Where demand and supply curves intersect. Where the markets are economically efficient

Note: Not mean supply and demand are equal, only where the quantity of each is equal

Not leading to a definite end or result. In the case of equilibrium price, means that the price/quanity is unknown and cannot be predicted

Does not mean "no change" however that is how it is modeled