Econ unit 2

Quantity Demanded

Amount consumers are willing to buy at each price.

Demand

Amount consumers will buy at various prices.

Negative Relationship

Increase in price decreases quantity demanded.

Utility

Usefulness or satisfaction from consuming a product.

Diminishing Marginal Utility

Decline in satisfaction with each additional unit consumed.

Substitution Effect

Consumers replace expensive goods with cheaper alternatives.

Demand Schedule

Lists quantities consumers buy at various prices.

Demand Curve

Graphical representation of demand schedule.

Determinants of Demand

Factors that shift demand rather than move along it.

Substitute Goods

Goods replacing others when prices rise.

Complementary Goods

Goods used together with other products.

Supply

Quantity producers offer at various prices.

Quantity Supplied

Amount producers are willing to sell at each price.

Positive Relationship

Higher prices lead to increased quantity supplied.

Profit

Money remaining after all production costs are paid.

Revenue

Total income generated from selling goods or services.

Supply Schedule

Shows price and quantity relationship for producers.

Supply Curve

Graphical representation of supply schedule.

Elastic Supply

Small price change causes major quantity supplied change.

Market Interaction

Companies adjust strategies based on price and profit.

Total Product

all of the product a company makes in a given period of time with a given amount of input

Marginal Product

the change in output generated by adding one more unit of input

Law of Diminishing Returns

Describes the effect that varying level of an input has on total and marginal product

Inelastic Supply

exists when a change in a good's price has little impact on the quantity supplied

Fixed Costs

production costs that do not change as the level of output changes

Total Costs

sum of the fixed and variable productions costs

Variable Costs

production costs that change as the level of output changes

Marginal Costs

the additional costs of producing one more unit of output

Market Equilibrium

a situation that occurs when the quantity supplied and the quantity demanded for a product are equal at the same price

Surplus

quantity supplied exceeds the quantity demanded at the price offered

Shortage

quantity demanded exceeds the quantity supplied at the price offered

Perfect Competition

an ideal market structure in which buyers and sellers each compete directly and fully under the laws of supply and demand

Monopolistic Competition

differs from perfect competition in one key respect - sellers offer different, rather than identical products

Oligopoly

a market structure in which a few large sellers control most of the production of a good or service

Pure Monopoly

presence of only one seller controlling all production of a good or service