Economics: Supply and Demand Flashcards

Vocabulary flashcards generated directly from the lecture notes covering key microeconomic concepts including demand, supply, elasticity, price controls, equilibrium, and supply/demand shifters.

Demand

The action of buyers who are willing and able to buy or pay for a good or service, recognizing substitutes.

Supply

The action of sellers where the higher the price of a good or service, the more willing and able they are to produce.

Elasticity

The responsiveness of demand where a minor or small change in price (such as a drop from $1.99$ to $1.50$) causes demand to change.

Inelasticity

The responsiveness of demand where a giant or big change in price (such as salt increasing from $1.99$ to $2.50$) results in a minimal shift in demand because there are no substitutes and the item is an essential need.

Equilibrium

The market clearing point where supply and demand are equal ($\text{Supply} = \text{Demand}$), representing an ideal state where buyers get what they want at the price they want.

Point of Diminishing Returns

An economic stage where the added quality, value, or yield of products decreases beyond a certain point relative to quantity.

Substitutes

A non-price demand shifter representing alternatives or having a different option for a product.

Complements

A non-price demand shifter where a product is completed or meant to work with something else.

Taxation

A government policy that places taxes on necessary, inelastic items (such as gas or cigarettes) or check earnings (such as taking $400,000$ from a $1,000,000$ Las Vegas check, leaving $600,000$).

Price Supports (Floors)

A government price control mechanism that establishes a minimum price level, such as sugar price supports or minimum wage.

Price Ceilings (Caps)

A government price control mechanism setting a maximum limit on prices, such as caps on gas prices or apartment floors (e.g., $680,000$ or $1,000,000$).

Minimum Wage

A price floor set at $16$, requiring workers to work $90$ days to qualify and at least $20$ hours a week to be subject to minimum wage rules.

Surplus

A market condition where quantity supplied exceeds quantity demanded, such as having very few workers under minimum wage.

Shortage

A market condition where quantity demanded exceeds quantity supplied, such as the manual labor shortage in the US.

Production Factors

Non-price supply shifters related to manufacturing costs, such as labor costs that keep going up.

Marketing

A non-price supply shifter that creates a demand or need for people to buy products (e.g., phones).

Miracle Rice

Genetically modified rice grown with iodine for eyesight that produces more kernels of rice on plants, driving prices down by increasing supply through technology.

TRUMP Protectionism

A policy involving closed borders that caused a US manual labor shortage, leading to deportation threats and prompting businesses to use machines instead of teen/manual labor.

Acts of Nature

Non-price supply shifters caused by environmental conditions like hurricanes or places getting wetter/drier, which destroy crops and increase prices.

Production Possibility Curve

A economic curve model used to analyze production tradeoffs and limits.

Production Prediction Curve

A model used to estimate future production quality and output quantities across years.