Introduction to Economics

These flashcards cover the foundational concepts of economics introduced in Unit 1, focusing on supply and demand.

What is Demand in economics?

Demand is the desire, willingness, and ability to buy a good or service.

What does the Law of Demand state?

The Law of Demand states that quantity demanded and price move in opposite directions.

What is a Demand Curve?

A Demand Curve is the graph of a line that connects the points on a Demand Schedule.

What is Diminishing Marginal Utility?

Diminishing Marginal Utility is the decrease in willingness to purchase an additional item as satisfaction decreases with each new item.

What does Inelastic Demand imply?

Inelastic Demand means that the price has very little effect on the demand for a good, such as gasoline.

What does Elastic Demand indicate?

Elastic Demand indicates that the quantity demanded increases significantly when price goes down, or vice versa.

Provide an example of an elastic good.

Soft drinks are an example of an elastic good.

Provide an example of an inelastic good.

Gasoline is an example of an inelastic good.

What happens when demand decreases?

When demand decreases, the demand curve shifts to the left.

What can cause shifts in demand?

Factors like population changes, income levels, popularity, expectations, substitutes, and complements can cause shifts in demand.

What is Supply in economics?

Supply is the quantities of a good or service that producers will sell at all possible market prices.

What does the Law of Supply state?

The Law of Supply states that producers will offer more goods and services at higher prices and less at lower prices.

What is Elastic Supply?

Elastic Supply refers to how quickly the supply responds to changes in price.

What does Inelastic Supply refer to?

Inelastic Supply means supply does not respond quickly to changes in price.

What is the relationship between cost of resources and supply?

As the cost of resources increases, the fewer goods will be produced, resulting in a decrease in supply.

What is an example of government regulation's impact on supply?

More regulation typically leads to less supply due to increased costs for compliance.

What is Equilibrium Price?

Equilibrium Price is the point where the Supply and Demand curves cross, indicating the price at which quantity supplied equals quantity demanded.

What happens in the case of a shortage?

In the case of a shortage, demand is more than the available product, which typically increases prices.

What is the effect of a surplus in the market?

A surplus occurs when supply is greater than demand, leading to lower prices.

What is a Price Control Floor?

A Price Control Floor is the lowest price allowed for a good or service, such as minimum wage, which can create surpluses.

What happens to prices when there is an increase in consumer confidence expectations?

If consumers expect prices to rise, demand may increase, causing prices to rise.

What effect did Hurricane Andrew have on orange juice prices?

Hurricane Andrew caused destruction that raised equilibrium prices and lowered equilibrium quantities of orange juice.