Chapter 3 Flashcards
(19 cards)
An increase in a products price will reduce the quantity demanded
Law of demand
A schedule showing the amounts of a good or service that buyers wish to purchase
Demand schedule
Consumers will buy additional units only if the price of those units is reduced
Diminishing marginal utility
A lower price increases the purchasing power of buyers money income
Income effect
At a lower price buyers have incentive to substitute what is now less expensive product
Substitution effect
List data points in the accompanying table and connected the points with a smooth curve
Demand curve
Factors other than price that determine the quantities demanded of a good or service
Determinants of demand
Good or service who’s consumption increases when income increases
Normal goods
Good who’s demand varies inversely with money income
Inferior goods
One that can be used in place of another good
Substitute good
One that is used together with another good
Complementary Good
A shift of the demand curve to the right is an increase in demand, change to the left is a decrease in demand
Change in demand
Shows quantity supplied compared to price
Supply
His price rises the quantity supplied rises; as price falls the quantity supplied falls
Law of supply
Corresponds with the price quantity supplied data
Supply curve
What are the six determinants of supply
Resource prices Technology Taxes Prices of other goods Producer expectations # of sellers in market
Particular mix of goods and services most highly valued by society
Allocative efficiency
Sets the max real price may charge for a product
Price ceiling
Minimum price fixed by the government movement
Price floor
