question
law of demand
answer
inverse relationship between price and quantity demanded
question
law of supply
answer
direct relationship between price and quantity supplied
question
change in quantity demanded
answer
a movement along the demand curve that shows a change in the quantity of the product purchased in response to a change in price
question
change in demand
answer
a shift of the demand curve, which changes the quantity demanded at any given price
question
shifters of demand
answer
1. tastes and preferences
2. number of consumers
3. price of related goods
4. income
5. future expectations
2. number of consumers
3. price of related goods
4. income
5. future expectations
question
shifters of supply
answer
1. new technology
2. input pricing
3. government action
4. expectation of future profit
5. related product possibility
6. number of suppliers
7. disaster
2. input pricing
3. government action
4. expectation of future profit
5. related product possibility
6. number of suppliers
7. disaster
question
substitutes
answer
two goods for which an increase in the price of one leads to an increase in the demand for the other
question
complements
answer
two goods for which an increase in the price of one leads to a decrease in the demand for the other
question
normal goods
answer
goods that consumers demand more of when their incomes rise
question
inferior goods
answer
goods that consumers demand less of when their incomes rise
question
shortage
answer
a situation in which quantity demanded is greater than quantity supplied
question
surplus
answer
a situation in which quantity supplied is greater than quantity demanded
question
price ceiling
answer
maximum legal price that can be charged for a product
(aims to help consumers)
(aims to help consumers)
question
price floor
answer
a legal minimum on the price at which a good can be sold
(aims to help producers)
(aims to help producers)
question
subsidy
answer
government payment to encourage or protect a certain economic activity
question
demand decrease
answer
shift left
question
demand increase
answer
shift right
question
supply decrease
answer
shift left
question
supply increase
answer
shift right
question
double shift rule
answer
if two curves shift at the same time, either price or quantity will be indeterminate
question
inelastic demand
answer
demand in which changes in price have little or no effect on the amount demanded
-steep, small portion of income, few substitutes
ex: insulin
-steep, small portion of income, few substitutes
ex: insulin
question
elastic demand
answer
demand in which changes in price have large effects on the amount demanded
-flat, many substitutes, luxuries
ex: chips
-flat, many substitutes, luxuries
ex: chips
question
total revenue test
answer
a method of measuring elasticity by comparing total revenues
Inelastic: price up, TR up
Elastic: price up, TR down
Inelastic: price up, TR up
Elastic: price up, TR down
question
demand coefficient
answer
perfectly inelastic: 0
inelastic: <1
unit elastic: 1
elastic: >1
perfectly elastic: ∞
inelastic: <1
unit elastic: 1
elastic: >1
perfectly elastic: ∞
question
consumer surplus
answer
the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays
question
producer surplus
answer
the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives
question
deadweight loss
answer
the total loss of producer and consumer surplus from underproduction or overproduction
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
