Basic Economics - Part 2

What is the effect of technological advancements on supply?

Technological advancements reduce production costs, increasing supply as producers can make more profit at each price level.

Joint products

Goods that are almost always produced together

How does the number of sellers in the market impact supply?

More sellers increase total supply as competition rises.

What role do resource costs play in the supply of a product?

Lower resource costs increase supply by boosting profitability, while higher costs reduce supply.

How do substitute and joint products influence supply?

Substitute products shift resources to more profitable items, decreasing supply of the original product. Joint products increase in supply together, like beef and leather.

What is the equilibrium price in a market?

It is the price where the quantity demanded equals the quantity supplied, stabilizing at the intersection of supply and demand curves.

What happens to equilibrium price and quantity when demand increases?

Both equilibrium price and quantity increase, as more consumers are willing to pay higher prices.

How does a decrease in demand affect equilibrium?

It lowers both equilibrium price and quantity, as there is less consumer interest.

What effect does an increase in supply have on equilibrium?

It reduces the equilibrium price and increases the equilibrium quantity.

Describe the impact of a supply decrease on equilibrium price and quantity.

A decrease in supply raises equilibrium price and lowers equilibrium quantity.

How does elastic demand affect total revenue when prices rise?

Total revenue falls because a price increase causes a significant drop in quantity demanded.

What is the effect on total revenue with a price drop in elastic demand?

Total revenue increases, as quantity demanded rises more than proportionately.

How does inelastic demand influence total revenue with a price increase?

Total revenue increases, as the quantity demanded does not significantly decrease.

What is unitary elasticity, and how does it affect revenue?

With unitary elasticity, total revenue remains constant despite price changes, as the change in quantity demanded offsets the price change.

Define "technological advancements" in the context of supply.

Innovations in production that lower costs and increase supply.

What are "substitute products"?

Products that can be produced with the same inputs, shifting resources based on profitability.

Describe "equilibrium price."

The price where supply and demand balance, stabilizing the market.

What is "elastic demand"?

Demand that is sensitive to price changes, affecting total revenue with price adjustments.