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18 Cards in this Set
- Front
- Back
Factors other than the price of a good that can affect purchases include:
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tastes and preferences, income, number of buyers, price of related goods, and expectations
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The ________ unit of a thing is the last bit of that thing.
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marginal
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What is marginalism?
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The idea that rational decisions are based on assessments of the costs and benefits of the final increments of an activity.
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The law of demand states that consumers will purchase ______ of a good the lower its opportunity cost (relative price), and vice versa. The basic reason for this is the ______ effect, which reflects adjustments people make solely because of changes in relative prices. A secondary reason for most goods is the ________ effect, which measures the adjustments people make because price changes alter consumers' _________.
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more; substitution; income; purchasing power
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The law of supply states that higher prices induce sellers to offer consumers _________ of their product, and vice versa. The supply curve depicts the
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more; maximum
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Markets permit buyers and sellers to communicate their desires and complete transactions. In doing so, markets reach...
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equilibrium
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When quantity demanded exceeds quantity supplied, the current price is too low and a _______ exists. This is known as a _______ market.
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shortage; sellers
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If current price of a good is above the equilibrium price, there is a _______ of the good, which is known as a _______ market.
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surplus; buyers
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supply price
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minimum payment required that will induce a bit more production
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ceteris paribus
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"All other influences being held constant"
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market price
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must be in accord with consumers' subjective evaluations before they will purchase a good
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complementary goods
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generate more consumer satisfaction if consumed together. Increases in the price of a good tend to reduce demands for its complements and vice versa
e.g. salt and pepper |
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substitutes
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goods increasingly purchased in place of the item in question when its price rises, and vice versa
e.g. coffee and tea |
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demand price
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a consumer's subjective value from having a bit more of a good
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substitution effect
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adjustments people make soley because relative prices change
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income effect
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people's adjustments when price changes alter purchasing power
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What would be the effect on a demand curve when the price of substitute changes?
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change in demand -- curve shifts
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law of supply
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quantities supplied are positively related to price
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