Chapter 4 & 5 Flashcards
(25 cards)
What are markets?
Anywhere buyers and sellers meet to exchange goods & services
What is Demand?
Combo of quantities that someone would be willing and able to buy over a range of possible prices at a given moment (a consumers willingness and ability to consume any given product)
Holding that all other factors remain at a constant increase in the price of a good or service will ______ the quantity demanded and vice versa
decrease
What is the Law of Demand?
More will be demanded at lower prices and less at higher prices
What are 5 factors that influence the demand of good?
- Taste and preference of the consumer (fashions in clothes)
- Income of people
- Changes in prices of related products (Tea vs. Coffee)
- Advertisements expenditures (Ads greatly influence consumers)
- The number of consumers in the market (the greater the # the higher the demand
What is supply?
The amount of a product a producer or seller would be willing to offer for sale at all possible prices in a market at a given point in time (the quantity or amount) (as of a community needed or available)
What is the Law of Supply?
The principal that more will be offered for sale at higher prices than at lower prices
What are 5 factors that influence the supply of goods?
- Price (if price or product increases supply increases and vice versa
- Cost of production (higher = lower supply
- Natural conditions (drought = lower supply)
- Technology (Better tech = higher supply)
- Government policies (Higher taxes = lower supply)
What is Elasticity?
The ability to change/ adapt
What is Elasticity of Supply?
The responsiveness of quantity supplied to a change in price
What are the 2 major types of Supply Elasticity?
- Elastic Supply: a slight change in price will lend to a drastic change in demand/ quantity
- Inelastic Supply: when a change in the price will have little to no effect on demand/ quantity
Example: Needs/Necessities - Gasoline/Healthcare and most foods
What is the price of a good or service determined by?
Supply and Demand
What happens when there is an increase in demand?
There is an increase in price
What happens when there is an increase in supply?
There is a decrease in price
Incentive
Something that motivates
Subsidy
A government payment to encourage or protect a certain economic activity (food, gas, milk, industries, etc) ( best interest of the public)
Fixed Costs
Costs of producers that do not change when output changes
Variable Costs and what are they sometimes called?
Production costs that vary as equal changes; sometimes called…. overhead costs
Overhead Costs
A broad category of variable costs that includes interest, rent, taxes & executive salaries
Total Cost
The sum of variable costs plus fixed units: all costs
Marginal Costs
The extra costs of producing none additional unit of production ( additional equipment or factory)
Average Revenue
Average price that every unit of output sells for
Total Revenue
The total amount earned by a company from the sales of its products
Marginal Revenue
Extra revenue from the sale of one additional unit of output
