Chapter 3:Supply and Demand Flashcards Preview

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Flashcards in Chapter 3:Supply and Demand Deck (27):
1

competitive market

a market that has many buyers and sellers so no single buyer or seller can influence the price.

2

money price

the number of dollars that must be given up it.

3

relative price

ratio of one money price to another.

4

quantity demanded

the amount that consumers plan to buy during a given time period and a particular price.

5

law of demand

states that "other things remaining the same, the higher the price of a good, the smaller the quantity demanded; and the lower the price of a good, the greater is the quantity demanded.

6

substitution effect

a higher relative price raises the opportunity cost of buying a good, so people buy LESS of it.

7

income effect

a higher relative price reduces the amount of good people can buy. usually this effect decreases the amount people buy of the good that rose in price.

8

demand

the entire relationship between the price of a good and the qunatity demanded.

9

demand curve

shows the relationship between the quantity demanded of a good and its price.
negatively sloped

10

change in the quantity demanded

a change in the price of a good/service leads to a ____ and a movement in the demand curve.
higher price=lower quantity demanded

11

change in demand (and a shift in the demand curve)

occurs when any factor that influences buying plans changes, other than the price of the good.
increase in demand=demand curve shift rightward
decrease in demand=demand curve shift leftward

12

substitute

a good that can be used IN PLACE OF another good

13

complement

a good that is USED WITH another good

14

demand curve shifts with changes in:

prices of related goods
expected future prices
income
expected future income and credit
population
preferences

15

expected future price

if the price of a good is expected to rise in the future, the opportunity cost of buying it now is lower than in the future.

16

for a normal good

an increase in income increases demand and shifts the demand curve rightward

17

for an inferior good

an increase in income decreases demand and shifts the demand curve leftward.

18

population

an increase in population increases demand and shifts the demand curve rightward.

19

quantity supplied

is the amount that producers plan to sell during a given period of time at a particular price.

20

law of supply

"other things remaining the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied.

21

supply

the entire relationship between the quantity supplied and the price of a good.

22

supply curve

shows the relationship between the price and the quantity supplied.
supply curve is positively sloped

23

change in the quantity supplied

a change in the price of a good leads to _________ and a movement along the supply curve.

24

change in supply

when any factor that influences selling plans other than the price of the good there is a ________ and a shift in the supply curve.
increase in supply=shift in supply curve rightward
decrease in supply=shift in supply curve leftward

25

Supply curve shifts in response to:

prices of factors of production
prices of related goods produced
expected future prices
the number of suppliers
technology
the state of nature

26

equilibrium price

price at which the quantity demanded equals the quantity supplied.

27

equilibrium quantity

the quantity bought and sold at the equilibrium price.