Econ - Law of Supply

One of the main reasons people go into business is to make a _________

profit

Terms: profit

the total revenue a firm receives from selling its product minus the total cost of producing it

Usually the ______ you supply the more profit you can make

more

Terms: quantity supplied

the amount of a good that firms are willing to supply at a particular price over a given period of time

With demand you think like a ________

consumer

With supply you need to think like a _______

producer

So the ________ the price the more a producer is willing to supply because they can make a higher ________.

higher, profit

What is the law of supply?

When price goes up, supply goes up

When price goes down, supply goes down

Supply and price has a _______ relationship since they move in the same direction

positive

Terms: supply schedule

a table list the quantity of the good that will be supplied a specified prices

Terms: supply curve

a graphical representation of the supply schedule, showing the quantity the firm will supply at each price

Terms: market supply curve

a graphical representation of the quantity supplied at various prices by all firms

Terms: perfect competition

when there are many firms selling identical good, firms are free to enter and exit the market, and consumers have full information about the price and availability of goods

What are 4 conditions of perfect competition?

1) every unit of the good sold in the market is identical

2) the good is produced by many firms (none are large enough to influence the price of the good)

3) new firms that want to supply the good are free to enter the market and existing firms are free to stop supplying the good

4) consumers are aware of the price charged by the various firms and have the opportunity to buy from the firm of their choosing

Terms: elasticity of supply

measure of the responsiveness of the quantity supplied to price changed

Terms: elastic

supply is very sensitive to price change

Terms: inelastic

supply is not very sensitive to price change

What is the law of demand

Price goes up, demand goes down

Price goes down, demand goes up

Demand and price have a _____ relationship since they move in opposite directions.

negative

When there is a price change there will be _______ on the graph

movement

When there is not a change in price there will be a ________ on the graph

shift

If demand decreases without a price change the curve will shift to the ______

left

If demand increases without a price change the curve will shift to the ______

right

What are 5 factors that could cause a shift in demand?

taste, income, price of related goods, expectations, number of buyers

Terms: Shift of the supply curve

the result of a change in the quantity supplied

Terms: Change in supply

when the supply curve shift (price stayed the same, but more or less of the product is supplied)

Terms: Change in the quantity supplied

when there is movement along the suppl curve (movement means the price changed)

A decrease in supply the curve will shift to the ______

left

A increase in supply, the curve will shift to the ______

right

What are 6 factors that could cause a shift in the supply curve

1) the cost of inputs

2) government policies

3) number of firms

4) technological change

5) natural disasters and weather

6) expectations about future prices

Terms: inventory

consist of goods that are held in storage temporarily

Terms: fixed inputs

inputs that cannot be changed

Terms: variable inputs

inputs that can be changed

Terms: production schedule

indicated the inputs needed to produce different quantities of output

Terms: marginal product of labor

the amount by which total output increases when one more worker is hired

Terms: diminishing marginal productivity

describes the decrease in the marginal product of a variable input such as labor as more of it is combined with a fixed input such as equipment

Terms: law of diminishing returns

a general tendency for total output to increase at a decreasing rate when additional amounts of a input are used in production, holding the amount of other input

Terms: fixed cost

the cost of inputs that do not vary with the amount of output produced

What is an example of a fixed cost?

rent for a building

Terms: variable cost

the cost of inputs that do vary with the amount of output produced

What is an example of a variable cost?

wages for employees

Terms: total cost

fixed cost plus variable cost

Terms: marginal cost

the additional cost of doing something one more time

Terms: marginal revenue

the additional revenue a firm receives from selling another unit of output