Studied by 2 peopleIncome effect
when prices are low, people are easily able to afford it since their budget would allow it.
Subsidies
are the opposite of taxes and help reduce price per unit.
entire curve
Changes in demand are when the ________ would shift upwards or downwards.
inverse impact
The cost of production (land, labor, capital) has a(n) ________ on the supply.
Disequilibrium
This occurs when there is a shortage or surplus in the market.
surplus
would only exist when the quantity supplied is greater than the quantity demanded.
Quantity Supplied
has a direct relationship with changes in the price of a particular good.
Substitution effect
When products price increase, they tend to increase in relative to other products.
equilibrium price
When supply is constant and only demand increases, ________ and quantity increases.
Demand
tends to decline (shift downwards) for inferior goods with an increase in consumer income.
Shift
in supply is due to the determinants of supply.
The law of supply
states that when prices increase, the supply increases as well direct relation
Taxes
are added up to the unit cost of production, thus making it more expensive.
Change in the quantity demanded
only occurs due to change in price movement along the curve.
Goods
are usually categorized into 2 types, inferior and normal.
Consumer expectation
pays a major role in the determination of the price.
Determinants of supply
are the factors that influence the supplier to offer more or fewer goods at the same price.
supply curve
Since price has a different impact on both buyers and sellers, the ________ is different than a demand curve.
equilibrium price
When supply is constant and only demand decreases, ________ and quantity decreases.
Demand
for a product is the quantity the customers are willing and able to pay for each and every price.
equilibrium price
When demand is constant and only supply increases, ________ and quantity decreases.
equilibrium price
When demand is constant and only supply decreases, ________ and quantity increases.
Income effect
when prices are low, people are easily able to afford it since their budget would allow it
Substitution effect
when products price increase, they tend to increase in relative to other products
Diminishing marginal utility
As more units of a product are consumed, the satisfaction/utility it provides tends to decline
Quantity Demanded
Has an inverse relationship with changes in the price of a particular good
Determinants of Demand
the factors that cause consumers to buy more or less at the same price; these are substitutes, preferences, population, income, complements, and expectations
Quantity Supplied
has a direct relationship with changes in the price of a particular good
The Equilibrium Price
price at which quantity supplied equals quantity demanded
Disequilibrium
This occurs when there is a shortage or surplus in the market
Double-shift rule
This rule states that when there is a simultaneous shift in both demand and supply, either price or quantity would stay indeterminate
Note 
Flashcard (24)