econ unit 2: demand and supply

inferior goods

goods whose demand decreases when consumer income increases, typically because they are seen as lower quality alternatives

complements

goods that are consumed together, such that an increase in demand for one leads to an increase in demand for the other

demand curve

a graph that shows the relationship between the price of a good and the quantity demanded by one consumer at different price levels

elasticity of demand

measures how consumers respond to price changes, reflecting whether demand is elastic or inelastic

elasticity of supply

the way suppliers respond to a change in price

supply schedule

a table that shows the relationship between the price of a good and the quantity supplied at different price levels

market supply schedule

shows relationship between prices and the total quantity supplied by all companies in a market

marginal cost

the additional cost of producing one more unit of something

quantity supplied

how much of a good is offered for sale at a specific price

marginal product of labor

the change in output from hiring one more worker

increasing marginal returns

when the next worker adds more output than the first

diminishing marginal returns

when you produce less and less output from each additional worker

ceteris paribus

all other things remaining constant

the law of demand

as the price of an item increases, the quantity demanded decreases and vice versa

the law of supply

as price increases, the quantity supplied increases

unitary elastic

a change in one variable results in an equally proportional change in another variable

fixed costs

does not change (rent, salaries)

variable costs

rise or fall depending on how much is produced

total costs

fixed plus variable costs

total revenue

amount of money a company receives by selling its good

it reduces supply, which increases demand, which raises prices

what is the effect of import restrictions on prices?