Econ 2

what is supply

how much producers produce

what happens to price when supply increases/decrease.

It is a direct relationship. So when price goes up so does supply. And when supply goes down so does price.

what is demand

demand is the different quanities of goods that consumers are willing and able to buy at different prices.

what happens when demand increases/decreases

It is an inverse realtionship. So when Price goes up quantity demanded goes down.

5 shifters of supply

prices/avalibilty of resources (input), # of producers, Technology, Taxes and subsidies, and future expectations.

prices/avalibilty of resources (input)

higher price= lower supply. low price = high price. (less profit)

# of producers

increase producers = increase of supply

Technology

High tech = increase in supply

taxes and subsudies

More pay = more product. More taxes = less product

future expectations

more profit in future = decrease

5 shifters of demand

taste/prefernces, # of consumers, price of related goods, Income, future expectations.

taste/prefernces

if someone wants it or not

# of consumers

population (only changes with death or immigaration)

price of related goods

subsitutes: something to use instead. Complements: something to buy with it.

Income

normal and inferioir goods.

normal goods

goods that consumers buy when they have more income (apple ipad)

inferior goods

alternate goods that people buy when they have less income ( samsung ipad )

future expecations

what consumers think will happen in future.

chnage in quanitity demanded

movement of curve

change in demand

a shift

price does not affect

demand curve

equillibrium

when quaiity demanded equqald quantity supplied.

how does equillibrium change with demand shifts

A decrease in demand will cause the equilibrium price to fall; quantity supplied will decrease.

how does equillibrium change with supply shifts

A decrease in supply will cause the equilibrium price to rise; quantity demanded will decrease.

demand curve

supply curve

elastic demand

when price changes quanitity demanded chnages. increase when price decreases. (coke)

inelastic demand

quantity demand deosnt change based on price. (consumers will buy item no matter what the cost). (glasses)

price ceiling

maximum legal price a place can charge. (keep affordable) (shortage)

price floor

Minimum legal price a seller can sell a product. (surplus)

4 market structure

perfect competition, monoploly, monopolitic competion, and oligopoly.

perfect competion

A simple market where many sellers compete wile sellung identical products. A lot of producers, identical products (fruit), almost no barriers to entry, no control over prices.

monopoly

a market where one single seller dominated the market. 1 producer, unique products, almost impossible to enter, control over prices. (google)

monopolistic competion

A market in which any companies sell products that are similar but not identical mant producers, similar but not identical products, low barriers of entry, limited control over proces.

oligoply

few producers, similar products, high start up costs, agreements over proces. (airlines)

gov monopoly

military

natural monopoly

market that runs most efficinetly when one firm supplies all of the products. (power plants)

physical capital

human made objects used to create ither goods and services ( machines/tools)

human capital

knowledge and skills that are used to help make a product. ( eductaion, expiernes)

factors of production

land , labor, capital, entrepreneurship

oppurtunity costs

the best decision given up in order to make a better decision. (apple vs samsung)

basic questions of economics

what should be produced, how should it be produced, and for whom should it be prodcued.

PPC

quantity demand

the amount of a good that people are willing and able to buy at a pruce

law of demand

inverse realtionship between price and quanity demand. Price Goes Up and Quantity Demanded Goes Down

dminiishing

decreasing

marginal

additional

utility

satisfaction

substitution effect

chnage in price motivates consumers to buy relativley cheaper goods.

income effect

change in proce affect the purchasing power of consumers income.

law of diminishing marginal utility

as you continue to consume a given product you will eventually get less additional satisfaction from each unit you consume.

ceteris paribus

all other things constant

law of supply

there is a direct relationship between price and quanitity supplied.Price Goes Up and Quantity Supplied Goes Up

total revenue

price x quanitity

elasticity of demand

determines how much more or how much less consumers will buy when prices changes.

SPLAT

substitues, proportion of income, luxury/necessary, additive or not, time of response

demand is ___ when the price change results in a relativley larger change in quanityy demandeed. people ___ need products urgently with this type of demand.

elastic, do not

demand is ___ when the price change results in a relatively smaller change in quanitity demanded. people ___ need prodcuts urgently with this type of demand.

inelastic, do

demand is ___ when the proce chnage results in a proportional change in quanitoty demanded.

unit elastic

market failure

a situation in which the free market system fails to satisfy society wants. (gov steps in)

4 market failures

public goods, externalties, monopolies, unequal distribution of income

public goods

goods that all society can use that are paid by taxes.

subsidies

gov pays bussiness to produce something that benefits society. (vacacines, schools)

trusts

combinations of firms designed to restrict competeion or control prices in a particular industry ( monopoly)

preditory pricing

dropping and raising money to hurt others in a competion.

demand for public goods

marginal social benefits its usefullness to society add is determined by citizens willingness to pay.

supply of public goods

marginal social costs providing eachh additional quanitity.

who determines demand

buyer

who determines supply

sellers

what is required to be placed on a SandD curve

Q, P, Pe, Qe, S, D, and da da das...

the amount of a product that consumers will purchase at dif proces

Demand Schedule

if prices raise on inelastic goods

total revuenue will increase

demand is inelastic if

quanitity demanded does not change

what is the purpose of reglation and dereuglation by the gov

encourgae competion in the market

sherman anti-trust act

break up monopolies to create more competieion.