Economics unit 2 supply and demand
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37 Terms
Demand
willingness and ability of buyers to purchase goods and services
Demand Schedule
The numerical representation of the law of demand
Demand Curve
The graphical representation of the law of demand
Law of Demand
As price increases
As price decreases
quantity demanded increases
decreases
As price increases
increases
As price decreases
Quantity demanded
number of units
Income Effect
Lower prices give customers more purchasing power and allows them to buy more
Substitution Effect
Higher prices give customers an incentive to find a substitute product
Utility
happiness or satisfaction
Law of Diminishing Utility
Eventually
Elasticity
if price rises
Inelasticity
when you change their price
Unit Elasticity
If price rises
Total Revenue
Quantity Demanded x Price
4 factors that determine elasticity
availability of substitutes
Price
Change in quantity demanded ALWAYS ALWAYS ALWAYS has to do with a change in _
Curve remains
just move point up and down the curve
Curve shifts left or right
What happens to the graph when there is a change in demand?
Determinants of Demand
income
Supply
willingness and ability of sellers to produce and sell goods and services
Law of Supply
As price increases
As price decreases
quantity supplied decreases
Quantity Supplied
number of units produced and offered for sale at a specific price
Price
Change in quantity supplied ALWAYS
Shift up and down a curve
what happens to curve when there is a change in quantity supplied?
Shifts left or right
what happens to curve when there is a change in supply?
Labor
the human effort used to produce goods an services
Wages
payments received in return for work
Equilibrium Wage
wage at which quantity of workers demanded = quantity of workers supplied
Labor Union
organization of workers that seek to improve wages
Price Floors
when government sets a minimum price (in this case wages)
Inferior Good
a good whose quantity demanded decreases when consumer income rises (or quantity demanded rises when consumer income decreases)
Normal Good
any goods for which demand increases when income increases
Price Ceiling
a maximum price that can be legally charged for a good or service
Determinants of Supply
resource prices