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15 Cards in this Set
- Front
- Back
demand curve
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- shows the quantity of a good that buyers wish to buy and are able to buy at each price
- a buyer's reservation price at every quantity |
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substitution effect
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- as the price of one good goes up, people substitute another good for it
- causes the downward slope because increase in price = decrease in purchases |
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income effect
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- people still buy the good (no substitution), but they cannot buy as much since their income can only support a certain amount
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change in quantity demanded
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- movement along the curve
- caused by a change in price ONLY |
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change in demand
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- shift of the entire demand curve
- caused by anything EXCEPT for price |
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normal good
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- as income increases, they buy more of this good
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inferior good
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- as income increases, they buy less of this good
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buyer's reservation price
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- the maximum a buyer will pay for a certain quantity of a good
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supply curve
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- shows the quantity of goods that sellers are able to sell and wish to sell at each possible price
- a seller's reservation price at every quantity |
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change in quantity supplied
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- movement along the curve
- change occurs because of price ONLY |
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change in supply
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- shift in the supply curve
- caused by anything EXCEPT for price |
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seller's reservation price
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- the lowest price they are willing to sell a quantity of goods for
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buyer's surplus
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- the difference between the buyer's reservation price and the market price
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seller's surplus
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- the difference between the market price and the seller's reservation price
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total surplus
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- the difference between the buyer's and the seller's reservation prices
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