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circular flow diagram
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a visual model of the economy that shows how dollars flow through markets among households and firms
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households
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consumers as individuals or in groups living under one roof who provide FOP and purchase g/s
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firms
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Businesses; organizations that produce goods or services
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resource (factor) market
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the "place" where resources (land, labor, capital, and entrepreneurship) are sold to businesses
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product market
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the market in which households purchase the goods and services that firms produce
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demand
answer
the quantity of a good or service that consumers are willing and able to buy
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Law of Demand
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consumers buy more of a good when its price decreases and less when its price increases
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quantity demanded
answer
the amount of a good or service that a consumer is willing and able to purchase at a given price
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demand curve
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a graph of the relationship between the price of a good and the quantity demanded
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determinants of demand
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Anything other than price of the current item that influences consumer buying decisions, including income, tastes and preferences, price of related items (substitutes and complements), number of consumers in the market, and expected future price.
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complement
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a good or service that may be purchased along with another good or service
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substitute
answer
a good that can be used in place of another good
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income
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money received, especially on a regular basis, for work or through investments.
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future consumer expectations
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consumers change in g/s demanded now based on what they think will happen in the future
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preference/taste
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likes and dislikes in consumption
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population
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number of consumers in a geographic region
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supply
answer
The quantity of something that producers have available for sale
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Law of Supply
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the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
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cost to produce
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how much businesses have to pay to purchase resources
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firms/sellers
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number of businesses selling the same or similar items in a geographic region
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technology
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change in physical capital that affects a firm's production
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government subsidies
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when the government helps businesses
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government regulations
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rules/laws that hurt businesses' production
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future producer expectations
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how a business changes the amount of a good/service supplied now based on what they think will happen in the future
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education
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change in human capital which affects a firm's productivity
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price determination
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The interaction of the broad forces of Supply and Demand which determine the market price level
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Equilibrium/Market Clearing Price
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the price at which the quantity demanded equals the quantity supplied
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disequilibrium
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describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market
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shortage
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A situation in which quantity demanded is greater than quantity supplied
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surplus
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A situation in which quantity supplied is greater than quantity demanded
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price floor
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a minimum price for a good or service set by the government
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price ceiling
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maximum legal price that can be charged for a product set by the government
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business organization
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the ownership structure of a company or firm
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sole proprietorship
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A business owned by one person
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partnership
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a business owned by two or more people
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corporation
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A business owned by stockholders who share in its profits but are not personally responsible for its debts
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liability
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legal responsibility
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lifespan
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length of time in which a business exists
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market structure
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the number and relative size of firms in an industry
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Pure/Perfect Competition
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An industry with many businesses selling identical products
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monopolistic competition
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a market structure in which many firms sell products that are similar but not identical
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monopoly
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A market in which there are many buyers but only one seller.
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oligopoly
answer
A market structure in which a few large firms dominate a market
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barriers to entry
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business practices or conditions that make it difficult for new firms to enter the market
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price control
answer
ability of a business to set their prices
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product differentiation
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real or imagined differences between competing products in the same industry
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money for goods & services
answer
undefined
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goods & services
answer
undefined
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factors of production
answer
undefined
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payment for factors of production
answer
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