Studied by 10 people
Demand
Schedule/curve showing various amounts of product that consumers willing + able to buy at several possible prices during a specific period of time
Demand schedule
Illustrates quantity demanded of a good or service at different prices
Law of demand
Other things equal, as price falls, the quantity demanded rises (and vice versa)
Diminishing marginal utility
Each successive unit of product consumed → Buyers get less satisfaction
Income effect
Lower price increases purchasing power of income → Buyer can purchase more of product than before (and vice versa)
Substitution effect
Buyer has incentive to substitute less expensive products for similar products that are relatively more expensive
Demand curve
Quantity demanded on horizontal axis, price on vertical axis; downward slope reflects law of demand
Determinants of demand
Other factors besides price that affect purchases; shifts the demand curve
Normal goods
Rise in income causes increase in demand
Inferior goods
Rise in income causes decrease in demand
Substitute goods
Increase in price of one related good → Demand for other good increases
Complementary goods
Increase in price of one related good → Demand for other good decreases
Change in demand
Shift of demand curve to right/left
Change in quantity demanded
Movement from one point to another on a fixed demand curve
Supply
Schedule/curve showing various amounts of product that producers are willing + able to make available for sale at several possible prices during a specific period of time
Supply schedule
Illustrates quantity supplied of a good or service at different prices
Law of supply
Other things equal, as price rises, the quantity supplied rises (and vice versa)
Supply curve
Upward sloping; reflects law of supply
Determinants of supply
Other factors besides price that affect supply; shifts supply curve
Change in supply
Shift of supply curve to right/left
Change in quantity supplied
Movement from one point to another on a fixed supply curve
Equilibrium price
Price where quantity demanded = quantity supplied
Equilibrium quantity
Quantity demanded and quantity supplied at the equilibrium price
Surplus
Quantity supplied exceeds quantity demanded; drives prices down
Shortage
Quantity demanded exceeds quantity supplied; drives prices up
Productive efficiency
Production of a good in the least-costly way
Allocative efficiency
Production of the particular mix of goods and services most highly valued by society
Price ceiling
Maximum legal price a seller can charge for a good or service
Price floor
Minimum legal price a seller can charge for a good or service
Note 
Flashcard (90)