Unit 3 Microeconomics Test

area of economics that deals with behavior and decisions by small units such as individuals and firms

-ability
-desire
-willingness to buy

quantity of a good or service varies inversely with its price

quantities demanded by everyone interested in purchasing the product

downward sloping

movement along the demand curve that shows a change in the quantity of the product purchased in response to a change in price

when the price of the product changes

feel richer or poorer

relative to other products

people are now willing to buy different amounts of the product at the same price

when something else changed other than the price

-consumer income
-consumer tastes
-substitutes
-complements
-change in expectations
-number of customers

measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price

the extent a change in price causes a change in the quantity demanded

a given change in price causes a relatively larger change in quantity demanded

a given change in price causes a relatively smaller change in quantity demanded

a given change in price causes a proportional change in quantity demanded

-can the purchase be delayed?
-are substitutes available?
-does the purchase use a large portion of income?
-is the product a luxury (elastic) or necessity (inelastic)

price x quantity = revenue

amount of usefulness or satisfaction that someone gets from the use of a product

extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product

the extra satisfaction from using additional quantities start to decrease
-customers are not as willing to pay as much for the second, third, etc...)
-demand curve is downward sloping

the amount of a product that would be offered for sale at all possible prices that could prevail in the market

suppliers will normally offer more for sale at a high price and less at a lower price

upward sloping

supply curve that shows the quantities offered at various prices by all firms that offer the product for sale in a given market

a change in amount offered for sale in response to a change in price

increase in quantity supplied

decrease in quantity supplied

sellers will offer different amounts of products for sale at all possible prices in the market

-cost of imports
-productivity
-technology
-taxes and subsidies
-expectations/opportunity cost
-government regulations
-number of sellers

-if the price of chocolate chips increases, there will be a decrease in supply for chocolate chip cookies
-curve shifts left

-if there is now a machine that can make chocolate chip cookies much faster, there will be an increase in supply for chocolate chip cookies
-curve shifts right

-if the school increases taxes for chocolate chip cookies, there will be a decrease in supply for them
-curve shifts left
-if the school receives a grant of money to make a cookie making machine, there will be an increase in supply for chocolate chip cookies
-curve shifts right

-if more chocolate chips get used to make brownies, there will be less to make chocolate chip cookies and their supply will decrease
-curve shifts left

-if there were new government regulations put in place that required air vents to get the smell of food away from the classrooms, less kids would smell the food and not as many would buy the chocolate chip cookies, which decreases their supply
-curve shifts left

-if more people/groups started to sell chocolate chip cookies, their supply would increase
-curve shifts right

a method of limiting purchase or usage of an item when demand exceeds supply

a situation in which prices are relatively stable (quantity of goods or services supplied is equal to the quantity demanded)

maximum legal price that can be charged for a product

quantity demanded is greater than the quantity supplied

lowest legal price that can be paid for a good or service

quantity supplied is greater than the quantity demanded