Econ Unit 3

demand

the amount of good or service buyers are willing and able to buy at different prices during a given time.

law of demand

when price goes up, quantity demand goes down

demand curve

negative slope, points represent what the demand will be at various prices

market demand

adding up all the demand in one market

demand schedule

a table that shows how many of a certain product people want to buy at different prices

diminishing marginal utility

the more you have of something, the less you value each additional unit of that thing. ex: too many workers

consumer income

the money people earn or receive

taste change

preferences that change over time

expectations change

you start thinking something different will happen in the future

complementary goods

things that go together because they enhance each other’s usefulness. ex: pb&j

population change (# of consumers)

variations in the total number of people in a specific area or market who might buy goods and services

substitutes

products or goods that can be used in place of each other to satisfy a similar need or want. ex: pepsi vs coke

substitution effect

the idea that when the price of something goes up, people tend to buy less of that thing and more of a similar thing that costs less

income effect

changes in your income can affect the things you buy

normal goods

products that people buy more of when they have more money and buy less of when they have less money. ex: clothes

inferior good

products that people tend to buy more of when they have less money. ex: fast food

neutral good

elasticity

how sensitive the quantity of something is to changes in its price, more substitutes ex: plane tickets

inelasticity

a change in price doesn't result in a significant change in the quantity that people are willing to buy, NOT sensitive. ex: epi-pen

law of supply

demand/supply curve shift left

decrease

demand/supply curve shift right

increase

change in quantity demand,supply

movement along the curve or from one point to another, in response to a change in the price of a product

demand (in terms of the curve)

the whole curve

quantity demanded (in terms of the curve)

one point on the curve, # of units purchased at a specific price

law of supply

as price goes up, quantity supplied goes up

change in quantity supplied

price going up=more quantity, up; price going down, less quantity

market supply curve

the demand and supply curve

law of diminishing returns

when you keep adding more of something, until it’s not beneficial anymore

supply elasticity

measure of how much producers can adjust the quantity of a product they make in response to changes in its price

elastic supply

a small change in price leads to a large change in quantity supplied

inelastic supply

a change in price results in only a small change in the quantity supplied

unit elastic

a small change in price causes an equal change in the amount people buy or sell

equilibrium

where quantity demand equals quantity supplied

shortage

demand has outpaced supply

ceiling

a government imposed limit on the price of a good or service to prevent a shortage, the limit is how low, near bottom of market curve

surplus

the price faced by consumers and producers is held above the equilibrium market price,

floor

government-imposed minimum price that must be charged for a particular good or service to prevent surplus, near the top of market curve