civics microeconomics
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Last updated 2:23 PM on 12/8/22
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18 Terms
1
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law of demand
as price increases, quantity demanded decreases (and vice versa)
- this inverse relationship between the price and quantity results in a negative sloping curve
- this inverse relationship between the price and quantity results in a negative sloping curve
2
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what are the 6 determinants of demand
- change in income of consumers
- change in population
- change in attitudes and tastes of consumers
- change in consumer expectations
- change in availability and prices of substitute goods
- change in availability and prices of complimentary items
- change in population
- change in attitudes and tastes of consumers
- change in consumer expectations
- change in availability and prices of substitute goods
- change in availability and prices of complimentary items
3
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substitute good
a good that can be used in the place of/instead of another good
4
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complimentary good
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an increase in demand shifts the curve to the -------. consumers are willing to buy more items at the same price.
right
6
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a decrease in demand shifts the curve to the -------. consumers are willing to buy fewer items at the same price.
left
7
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elasticity of demand
a measure of the sensitivity of quantity demanded to a change in price.
8
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demand elastic
a change in the price of an item has a big effect on the quantity demanded. (many substitutes, want)
9
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demand inelastic
a change in the price of an item has little effect on the quantity demanded. (few substitutes, need)
10
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law of supply
as price increases, quantity supplied increases (and vice versa)
- this direct relationship between price and quantity results in a positive sloping curve.
- this direct relationship between price and quantity results in a positive sloping curve.
11
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what are the 6 determinants of supply
- changes in cost of inputs
- changes in productivity/technology
- change in number of sellers (firms)
- change in gov policy (more gov regulation, minimum wage, safety/environmental standards, increases costs, which lowers supply. less regulation does the opposite)
- changes in tax and subsidies: taxes increase costs, subsidies lower them
- changes in producer expectations
- changes in productivity/technology
- change in number of sellers (firms)
- change in gov policy (more gov regulation, minimum wage, safety/environmental standards, increases costs, which lowers supply. less regulation does the opposite)
- changes in tax and subsidies: taxes increase costs, subsidies lower them
- changes in producer expectations
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subsidy
payment to an individual or business for a specific action
13
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elasticity of supply
a measure of the sensitivity of quantity supplied to a change in price.
14
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supply elastic
a change in the price of an item has a big effect on the quantity. (easy to increase production)
15
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supply inelastic
a change in the price of an item has little effect on the quantity supplied. (difficult to increase production)
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surplus
the amount by which the quantity supplied is higher than he quantity demanded.
- signals that the price is too high
- signals that the price is too high
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shortage
the amount by which the quantity demanded is higher than the quantity supplied
- signals that the price is too low
- signals that the price is too low
18
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equilibrium price
the point where they achieve balance.