Chapter 4 Flashcards
What is the law of demand?
The law of demand: the quantity of a good demanded is inversely related to the good’s price
As prices change, people change how much they’re willing to buy
What is a demand curve?
A demand curve graphically represents the relationship between price and quantity demanded
What is the quantity demanded?
Quantity demanded refers to a specific amount that will be demanded per unit of time at a specific price, other things constant
What is the demand?
Demand refers to a schedule of quantities of a good that will be bought per unit of time at various prices, other things constant
5 demand shift factors
Society’s income The prices of other goods Tastes Expectations Taxes and subsidies
What are shift factors?
Shift factors of demand are factors that cause changes in demand (shifts in the demand curve).
What is the law of supply?
The law of supply: the quantity of a good supplied is directly related to the good’s price
What is a supply curve?
A supply curve graphically represents the relationship between price and quantity supplied
Quantity supplied
Quantity supplied refers to a specific amount that will be supplied per unit of time at a specific price, other things constant
What is supply?
Supply is a schedule of quantities of a good a seller is willing to sell per unit of time at various prices, other things constant
Shift factors in supply
Price of inputs Technology Expectations Taxes and subsidies Quotas
What are shift factors?
Shift factors of supply cause changes in supply
What is the price of inputs?
When costs go up, profits go down, so that the incentive to supply also goes down.
What is technology?
Technology advances reduce inputs needed to produce a given supply of goods, decreasing costs, increasing profits, leading to increased supply
What is a quota?
Limit
