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29 Cards in this Set
- Front
- Back
Demand
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The amounts of a good or service that buyers (or a buyer) wish to purchase at various prices during some time period.
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Demand Schedule
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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.
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Law of Demand
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The principal 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.
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Diminishing Marginal Utility
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In any specific time period, each buyer of a product will derive less satisfaction (or benefit, or utility) from each successive unit of the product consumed.
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Income Effect
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A change in the quantity demanded of a product that results from the change in real income (purchasing power) caused by a change in the product's price.
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Substitution Effect
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(1) a change in the quantity demanded of a consumer good that results from a change in its relative expensiveness caused by a change in the product's price; (2) the effect of a change in the price of a resource on the quantity of the resource employed by a firm, assuming no change in its output.
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Demand Curve
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A curve illustrating demand.
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Determinants of Demand
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Factors other than price that determine the quantities demanded of a good or service.
1) consumers' tastes (preference) 2) the number of buyers in the market 3) consumers' incomes 4) the prices of related goods 5) consumer expectations. |
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Normal Goods
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A good or service whose consuption increases when income increases and falls when income decreases, price remaining constant.
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Inferior Goods
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A good or service whose consuption declines as income rises (and conversely), price remaining constant.
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Substitute Good
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Products or services that can be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises.
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Complementary Good
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Products and services that are used together. When the price of one falls, the demand for the other increases (and conversely).
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Change in Demand
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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.
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Change in Quantity Demanded
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A change in the amount of a product that consumers are willing and able to purchase because of a change in the product's price.
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Supply
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The amounts of a good or service that sellers (or a seller) will offer at various prices during some period.
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Supply Schedule
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A schedule showing the amounts of a good or service that sellers (or a seller) will offer at various prices during some period.
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Law of Supply
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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.
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Supply curve
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A curve illustrating supply.
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Determinants of Supply
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Factors other than price that determine the quantities of a good or service. 1) resource prices 2) technology 3) taxes and subsidies 4) prices of other goods 5) producer expectations 6) the number of sellers in the market.
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Change in Supply
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A change in the quantity supplied of a good or service at every price; a shift of the supply curve to the left or right.
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Change in Quantity Supplied
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A change in the amount of a product that producers offer for sale because of a change in the product's price.
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Equilibrium Price
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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 price to rise or fall.
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Equilibrium Quantity
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1) The quantity demanded and supplied at the equilibrium price in a competitive market; 2) the profit-maximizing output of a firm.
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Surplus
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The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific (above-equilibrium) price.
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Shortage
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The amount by which the quantity demanded of a product exceeds the quantity supplied at a particular (below equilibrium) price.
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Productive Efficiency
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The production of a good in the least costly way; occurs when production takes place at the output at which average total cost is a minimum and marginal product per dollar's worth of input is the same for all inputs.
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Allocative Efficiency
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The apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and price or marginal benefit are equal.
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Price Ceiling
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Sets the maximum legal price a seller may charge for a product or service.
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Price Floor
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A minimum price fixed by the government for a product or service.
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