Supply and Demand Elasticity 2.1-2.4

Demand Schedule

a table that shows how much of a good or service consumers will be willing and able to buy at different prices

The Law of Demand

as price rises, the quantity demanded falls

Quantity Demanded

the actual amount of a good or service consumers are willing and able to buy at some specific price

Demand Curve

a graphical representation of the demand schedule

Change in Demand

a shift of the demand curve, which changes the quantity demanded at any given price

Movements along the demand curve

a change in the quantity demanded of a good that is the result of a change in that good's price

rightward shift

an increase in the demand and supply curves leades to a.......

leftward shift

a decrease in the demand or supply curves leads to a............

Substitutes

two goods for which a rise in the price of one of the goods leads to an increase in the demand for the other good

Complements

two goods (often consumed together) for which a rise in the price of one of the goods leads to a decrease in the demand for the other good

Normal Goods

describes a good for which a rise in income decreases the demand for the good

Inferior Goods

describes a good for which a rise in income decreases the demand for the good

individual demand curve

illustrates the relationship between quantity demanded and price for an individual consumer

Quantity supplied

the actual amount of a good or service people are willing to sell at some specific price

supply schedule

shows how much of a good or service producers would supply at different prices

Supply curves

shows the relationship between the quantity supplied and the price

Law of Supply

says that, other things being equal, the price and quantity supplied of a good are positively related

Changes in Supply

a shift of the supply curve, which changes the quantity supplied at any given price

input

a good or service that is used to produce another good or service

substitues in production

describes two goods for which producers can use the same inputs to make either one good or the other

Complements in production

goods that are produced as by-products from producing another good

Individual supply curve

illustrates the relationship between quantity supplied and price for an individual producer

Market supply curve

shows how the combined total quantity supplied by all individual producers in the market depends on the market price of that good

negative

The slope of the demand curve is always?

positive

The slope of the supply curve is always?

Elasticity formula

% change in quantity / % change in price

elastic

greater than 1

perfectly elastic

equal to infinity

inelastic

less than 1

perfectly inelastic

equal to 0

unit elastic

equal to 1

substitution effect

the change in the quantity of a good demanded as the consumer substitutes the good that has become relatively cheaper for the good that has become relatively more expensive

income effect

the change in the quantity of a good demanded that results from a change in the consumers purchasing power when the price of the good changes

Elasticity of demand

the ratio of the percentage change in the quantity demanded of a product to a percentage change in its price

prefectly inelastic demand

when the quantity demanded does not respond to changes int the price

total revenue

Price x Quantity sold

price effect

after a price increase, each unit sold sells at a higher price, which tends to raise revenue

quantity effect

after a price increase fewer units are sold, which tends to lower revenue

price elasticity of supply

a measure of the responsiveness of the quantity of a good supplied to change in the price of that good