Macro Chapter 3-4

What are demanders?

Consumers who purchase goods and services

What is quanitity demanded?

The amount of a good consumers buy at a specific price

What is the law of demand?

It states that as price increases quantity demanded decreases and vice versa

What is a demand curve?

Shows the quantity of a good consumers will buy at different prices

What are complementary goods?

Products used together that increase demand for each other (batteries and flashlights)

What are subsititute goods?

Products that replace each other (cheaper version of same item)

What are suppliers?

People/Firms that produce goods and services

What is law of supply?

Its states that price increases quantity increases and vice versa

What is a supply curve?

It shows how much producers will make/supply at different prices

What is market equilibrium?

Occurs when the quanitity producers sell matches the quanitity consumers buy

What is the difference between demand and quantity demand?

demand = amount consumers buy at a range of prices, quantity demand = amount consumers buy at a specific price

What is the difference between supply and quantity supply

supply = amount producers make at a range of prices, quantity supply = amount producers make at a specific price

What is a surplus?

When quantity supplied exceeds quantity demanded

What is a shortage?

When quantity demanded exceeds quantity supplied

What is a shift in terms of demand?

Changes amount of good consumers buy at all prices (such as increased income)

What does Ceteris Paribus mean?

"Other things being equal" refers to factors other than price

What six factors can shift demand?

Popularity, Population, Income, Price of Substitues, Price of Compliments, Expectations

What is a normal good?

Demand increases as income increases (new cars, fancy vacations)

What is a inferior good?

Demand increases as income decreases (used cars, rental housing)

What are substitutes?

A good or service used in place of another good or service

What is a shift in terms of supply?

Changes quanitity of a good companies will supply at all prices (such as lower production costs)

What four factors can shift supply?

Natural Conditions, Change in input prices, Technology, Government policy

What is the supply and demand model?

Model used to determine the prices and quantities of goods in a market

On the supply and demand model what are the X and Y axis?

X axis = quantity of good, Y axis = price of good

What direction does the supply curve go?

up, as prices increase businesses want to produce more

What direction does the demand curve go?

down, the lower the price the more people buy

What is self regulation?

Markets tendancy to correct surplusses and shortages and return to equilibrium

How to graph a shift?

Draw original model, Identify wether supply or demand is affected, Determine direction of shift, Find new equilibrium

What happens when a goods price changes on a graph?

It moves up or down the curve depending on wether the change was positive or negative