Economics Unit 2

Law of Supply

as prices rise, so does supply. there is direct relationship between price and quantity supplied.

Law of Demand

as price falls, quantity demanded rises other things being equal. This describes an inverse relationship between price and quantity demanded.

Changes in Quantity Demand (Movement)

a movement can only happen when a price change occurs.

Changes in Quantity Demand (Shift)

• a change in a non price factor causes a shift.

• a demand shift occurs when there is a change in a non price factor.

Supply Movement

a movement along the line that is caused by a price shift.

SUPPLY Shift (GOOD=RIGHT)

* if the company is able to produce goods, the shift will be to the right which is increasing total quantity produced.

SUPPLY Shift (BAD=LEFT)

* if there is an event that reduces the company ability to produce goods, shift will be to the left, decreasing total quantity produced.

(D.D) change in income

when your income goes up you spend more stuff and vis versa.

(D.D) complementary

items that go well together (ketchup and fries)

(D.D) substitute

goods that can be used to replace another good (coke and pepsi)

(D.D) change in taste and preference

as consumer tastes change so does demand.

(D.D) change in expectations

an expected change in the future price will change in demand today.

(D.D) change in the # of consumers

changes of the # of consumers can happen for a variety of reasons for example death, birth, etc.

(S.D) # of producers

if there are more producers, then total production will increase at all levels.

(S.D) resource price

are the inputs for business. if there is a change in the price of a resource it causes a change in the cost to produce goods,

(S.D) state of tech

tech is used to increase productivity and output. (computers robots, machinery)

(S.D) prices of related goods

related goods for producers are tings that the company could also make instead.

(S.D) nature

change in nature (think weather and natural events)

(S.D) producer expectation

if producers expect prices in the future, it changes their behaviour today.

Slope Demand

is generally considered to slope downward at higher prices consumers buy less.

Slope Supply

is generally considered to slope upward as the prices rise meaning suppliers are willing to produce more.

Surplus

when the price is lesser than the equilibrium price then the quantity supplier is greater than the quantity demanded.

Shortage

when the price is lesser than the equilibrium price then the quantity demanded is greater than the quantity supplied.

Equilibrium

refers to a situation in which the price has reached the level where quantity supplied equals quantity demand.

Unemployment

anyone over the age 16 not in school or who don’t have a job but are actively seeking work.

Seasonal

is unemployment due to seasonal changes in employment or labour supply (wonderland)

Frictional

is a brief period of unemployment caused by moving between jobs or into labour market ex. college or university graduates.

Structural

caused by mis match between the skills or location of job seekers and the requirement or location of available jobs.

Cylical

caused by a lack of job opening a poor level of aggregate demand. occurs during recessions and company cut back workers.

Economic Inequality

an unequal distribution of income and opportunity between different groups of society.

Unemployment Equation

Progressive income tax

the more money you make the more taxes you pay

Regressive taxes

is applied to all citizens no matter what you income is, you still have to pay.

Welfare State

the social safety net is set of government policies to support struggling citizens through taxation and spending.