Microeconomics Chap 1.

economics

the study of the choices people make to attain their goals given their scarce resources

demand schedule

a table showing the relationship between price and product demand

quantity demanded

how much of a good people are willing to buy at a given price

demand curve

the graph showing the relationship between price and product demand

market demand

demand from consumers of a given good

law of demand is

the inverse relationship between price and quantity demanded holding all else constant

income effect is

when income rises, so does spending

substitution effect

the quantity demanded of a good changes based on change in price of a substitute

purchasing power is

how much someone is capable of spending on a fixed income

ceteris paribus condition

the necessity of holding all else constant when constructing a demand curve

six main variables in a demand curve are

income, prices of related goods, tastes, demographics, PEF, and disaster

PEF

Expected future price

quantity supplied

how much of a good a firm is willing to supply at a given price

supply schedule

table showing relationship between price of good and quantity supplied

supply curve

the graph showing the relationship between price of good and quantity supplied

law of supply (holding all else constant)

an increase in price will increase quantity supplied

6 main variables in market supply

prices of inputs, change in technology, prices of related goods, number of firms in market, PEF, and disaster

change in supply

a shift in a supply curve

change in quantity supplied

movement along a supply curve and is the change in price of a good

market equilibrium

quantity demanded equals quantity supplied

marginal cost

the extra cost of producing one more unit

marginal benefit

the extra benefit of consuming one more unit