AP Microeconomics Vocab Unit 2 낱말 카드 | Quizlet

Market

Any institution or mechanism that brings together buyers (demanders) and sellers (suppliers) of a particular good or service.

Demand

A schedule showing the amounts of a good or service that buyers (or a buyer) wish to purchase at various prices during some time period.

Demand Schedule

a table that shows the relationship between the price of a good and the quantity demanded

Elasticity Formula

% change in quantity demanded / % change in price

Elastic Demand

Product or resource demand whose price elasticity is greater than 1. This means the resulting change in quantity demanded is greater than the percentage change in price.

Inelastic Demand

Product or resource demand for which the elasticity coefficient for price is less than 1. This means the resulting percentage change in quantity demanded is less than the percentage change in price.

Demand Curve

A graph of the relationship between the price of a good and the quantity demanded

Law of Demand

The principle that, other things equal, an increase in a product's price will reduce the quantity of it demanded, and conversely for a decrease in price.

Diminishing Marginal Utility

Decreasing satisfaction or usefulness as additional units of a product are acquired

Income and Substitution Effect

Substitution: when consumers react to an increase in a good's price by consuming less of that good and more of other goods

Income: the change in consumption resulting from a change in real income

Normal Good

A good or service whose consumption increases when income increases and falls when income decreases, price remaining constant.

Inferior Good

A good or service whose consumption declines as income rises, prices held constant.

Factors that Determine Demand

• Tastes and Preferences

• Income

• Market Size

• Expectations

• Related Goods (complement or substitute)

Change in Demand

A change in the quantity demanded of a good or service at every price; a shift of the demand curve to the left or right.

Change in Quantity Demanded

movement along the demand curve showing that a different quantity is purchased in response to a change in price

Supply

A schedule showing the amounts of a good or service that sellers (or a seller) will offer at various prices during some period

Supply Schedule

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

Supply Curve

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

Law of Supply

The principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and conversely for a price decrease.

Equilibrium Price and Quantity

• The price in a competitive market at which the quantity demanded and the quantity supplied are equal, there is neither a shortage nor a surplus, and there is no tendency for the price to rise or fall.

• (1) The quantity demanded and supplied at the equilibrium price in a competitive market; (2) the profit-maximizing output of a firm.

Surplus

The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific (above-equilibrium) price.

Shortage

The amount by which the quantity demanded of a product exceeds the quantity supplied at a particular (below-equilibrium) price.

Factors that Determine Supply

• Technology/Productivity

• Resource Costs

• Expectations of producers

• Number of sellers

• Taxes/Subsidies/Govt

• Other goods

• Natural Disaster/Causes

Change in Supply

A change in the quantity supplied of a good or service at every price; a shift of the demand curve to the left or right.

Change in Quantity Supplied

change in the amount offered for sale in response to a price change; movement along the supply curve

Total Revenue Test

A test to determine elasticity of demand between any two prices: Demand is elastic if total revenue moves in the opposite direction from price; it is inelastic when it moves in the same direction as price; and it is of unitary elasticity when it does not change when price changes.

Elastic Supply

Product or resource supply whose price elasticity is greater than 1. This means the resulting change in quantity supplied is greater than the percentage change in price.

Inelastic Supply

Product or resource demand for which the elasticity coefficient for price is less than 1. This means the resulting percentage change in quantity demanded is less than the percentage change in price.

Consumer Surplus

The difference between the maximum price a consumer is (or consumers are) willing to pay for an additional unit of a product and its market price; the triangular area below the demand curve and above the market price.

Producer Surplus

The difference between the actual price a producer receives (or producers receive) and the minimum acceptable price; the triangular area above the supply curve and below the market price.

Deadweight loss

The fall in total surplus that results from a market distortion, such as a tax

Price Ceiling (binding & non-binding)

A legally established maximum price for a good or service.

Price Floor/ Support (binding & non-binding)

• A legally determined price above the equilibrium price.

• A minimum price that government allows sellers to receive for a good or service; a legally established or maintained minimum price.

Tax Incidence

The person or group that ends up paying a tax

Subsidies

A payment of funds (or goods and services) by a government, firm, or household for which it receives no goods or services in return. When made by a government, it is a government transfer payment.

Quotas

limitations on the amount of specific products that may be imported from certain countries during a given time period

Tariffs

A tax imposed by a nation on an imported good.

Per-unit tax

A tax of a fixed amount for each unit of a good or service sold