Adobe Ch. 3 Flashcards Preview

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Flashcards in Adobe Ch. 3 Deck (47):
1

demand curve tells us what

different amount of goods consumers are willing and able to buy at different possible prices, all else constant

2

willingness to consume is determined by

customer preferences; ie trend, advertising, season

3

ability to consume is

economic factors determine- income, good price, related good price

4

marginal benefit is the

additional benefit

5

two most important variables are

price of good and quatntity demanded

6

reservation price

max price consumer is willing to pay for a unit of good at different quatnityt level

7

law of demand

demand curve slopes down bc there is inv relationship between price of good and quatnity demanded

8

change in quantity demanded is

change in price of good itself, involves movement ALONG curve

9

change in demand is

change in one plus demand shifters, inward outward shift of the actual curve

10

why does the demand curve slope down

substitution effect, income effect

11

substitution effect of price change

consumers substitute products

12

income effect

purchasing power reduced as price of good rises

13

demand shifters include

consumer income, price of substitute goods, price of complementary goods, taste, preference, number of conusmers in market, expected future price of good, price expectations, consumer preference

14

law of demand states what

theres an inverse relationship between price and quatnity demanded

15

ceteris paribus

all else held constant

16

normal goods

demand increase or decrease directly with income change ie steak

17

inferior goods

demand increase or decrease inversly with income change ie ramen

18

subbstitue good

good that can be replaced with another good; increase in price of one equals increase in demand of the other

19

complementary good

increase in price of one causes decrease in demand for other ie milk and cookies

20

change in product price never changes demand

only quanityt demanded will change

21

change in anything other than product price will shift

demand curve -- mortgage, linked markets, normal and inferior goods

22

supply curve shows what

amount of product that producers will produce for sale at each series of possible prices

23

supply curve equals

marginal cost

24

law of supply

direct relatinship between price of good and quatnity supplied, is upward sloping

25

cange in quantity supplied

change in price of good itself - up or down movement along given supply schedule

26

law of increasing opportunity cost

opportunity cost of production rises as more of good is produced; suppliers willing to increase production only if price rises

27

supply shifters

resource/input prices, alternative output prices, expected prices of ood in question, tecnology, tax, subsidy, number of producers in market, weather, labor strikes

28

change in supply is

actual movement of supply curve

29

a higher input price means

left shift in supply of product

30

subsidies lower production cost meaning

increase supply

31

excess supply or surplus means

ny price above equilibrium price; q supplied greater than q demanded

32

excess demand or shortage

any price below equil. price, q demanded greater than q supplied

33

exccess demand is

shortage

34

excesss supply is

surplus

35

equilibrium is when

quantity supplied euqals quantity demanded

36

when shift of demand and supply are same direction...

equilibrium price is indeterminante

37

when shift of demand and supply are opposite directions

equilibrium quatnity is indeterminte

38

price ceiling

sets max legal price seller can charge for product

39

price ceiling above equilibrium price has

no effect and is nonbinding

40

price ceiling below equilibrium price

upsets equilibrium, is binding-- causes shortage

41

PRICE CEILING BELOW EQUILIBRIUM PRICE CAUSES

SHORTAGE

42

what can gov do if there is persistent shortage

issue ration coupons, black markets might occur

43

price floor

sets min legal price set by goverment

44

price floor above equilibrium price

upsets equilibrium, binding causes surplus

45

price floor below equilibrium price

no effect on market, is non binding

46

PRICE FLOOR BELOW EQUIL PRICE CAUSES

SURPLUS

47

if tehre is persistent surplus, gov can do what

supply control, demand exapnsion, government purchases