Demand
The desire to own something and the ability to pay for it
Law of demand
Consumers will buy more of a good when it's price is lower and less when it's price when it's higher
Substitution
When consumers react to an increase in a goods price by consuming of that good and more of a substitute good
Income effect
The change in consumption that results when a price increases causes real income to decline
Demand schedule
A table that lists the quantity of a good a person will buy at various prices in a market
Market demand schedule
A table that lits the quantity of a good all consumers in a market will buy at various prices
Demand curve
A graphic representation of a demand schedule
Demand....
The law of demand is the result of the substitution effect and the income effect
Demand graph
The vertical axis is always labeled with prices
The horizontal axis should be labeled with quanity
...
Demand will always go down on a demand graph
Certeris paribus
A Latin phrase that means all things held under constraint
Normal good
A good that consumers demand more of when thier income increases
Inferior good
A good that consumers demand less of when thier income increase
Demographics
The statistical characteristics of populations and population segments , especially when used to identify consumer markets
Complements
Two goods that are bought and used together
Substitutes
Goods that are used in place of one another
Factors that make demand curve shift?
Income ,consumer expectations , population ,demographics , consumer tastes and advertising
...
When we drop the Ceteris paribus rule and allow other factors to change ,we no longer move along the demand curve. Instead the entire demand curves shifts
Elasticity of demand
A measure of how consumers respond to price changes
Inelastic
Describes demand that is not very sensitive to price changes (needs)
Elastic
Describes demand that is very sensitive to s change in price (luxury good )
Unitary elastic
Describes demand whose elasticity is exactly equal to 1
Total revenue
The total amount of money a company receivers by selling goods or services
Elastic demand comes from
1.subsitute goods
2. A fixed budget that does not allow for price changes
3. The perception of a good as a luxury item
Supply
The amout of goods available
Law of supply
Producers offer more of a good as its price increases and less as its price falls
Quantity supplied
The amout that a supplier is willing and able to supply at a specific price
Supply schedule
A chart that lists how much of a good a supplier will offer at various prices
Variable
A factor that can change
Market supply schedule
A chart that lists how much of a good all suppliers will offer at various prices
Supply curve
A graph of the quanity supplied of a good at various prices
Market supply curve
A graph of the quantity supplied of a good by all suppliers at various prices
Elasticity of supply
A measure of the way quantity supplied reacts to a change in price
two things that go with law of supply
1.iindividual firms increasing production
2.new firms entering or exiting
Marginal product of labor
The change in output from hiring one additional unit of labor
Increasing marginal returns
A level of production in which the marginal product of labor increses and the number of workers increase
Diminishing marginal returns
A level of production in which marginal product of labor decreases as the number of workers increases
Fixed cost
A cost that does not change ,no matter how much of a good is produced
Variable cost
A cost that rises and falls depending on the quantity produced
Total cost
The sum costs plus variable costs
Marginal costs
The cost of producing one more unit of a good
Marginal revenue
The additional income from selling one more unit of a good
Average cost
The Total cost divided by the quanity produced
Operating cost
The cost of operating a facility
The best level output for a job is when
Where marginal Cost equals marginal revune
Marginal returns
The addition of more workers to a firm allow for a greater amount of specialization
Specialization increase the output product
Subsidy
A government payment that supports a business or market
Excise tax
A tax on the production or sale of a good
Regulations
Government intervention in a market that affects the production of a good
Why does the supply curve shift?
Shifts in prices
Rising costs
Technology
Changes in the global economy
Future expectations of prices