demand schedule
a table that shows the relationship between the price of a good and the quantity demanded
supply schedule
a table that shows the relationship between the price of a product and the quantity of the product supplied
inverse relationship
between price and quantity demanded
substitution effect
as prices rise � or income decreases � consumers will replace more expensive items with less costly alternatives.
supply curve
if price goes up, willing to supply more to the market
change in price
movement along demand curve, change in quantity demanded
A supply curve
can curve in or curve out(shifting outward better for the economy)
positive slope
supply schedule
negative slope
change in quantity
Equilibrium point
The point at which the quantity demanded equals the quantity supplied
Non-price determinants of demand
The variables that can influence demand: Income, Preferences, Prices of related goods (Substitution and Complementary), expectation of future price change, Demographic changes/population.
Non-price determinants of supply
prices of inputs, expectations of future price change, number of firms, technology, taxes and subsidies
circular flow model
A model that shows the flow of goods and services and the interaction among households, businesses, and banks
GDP
Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
the market value
is the price
Measure GDP
Consumer(70%)+investment(15%)+gov spending(20%)+exports(-5%)
factors of production
land-(rents, labor-(wages), capital-(interest & dividends), entrepreneurship skills-(profits)
Economist Say law
if you make it, someone will buy it(his law supply creates its own demand)
Stock vs. Flow
Stock- quantity measured at a point in time(money)
Flow- quantity measured per unit of time(the many times it goes around)
opportunity cost
the most desirable alternative given up as the result of a decision
production possibility curve
the law of increasing opportunity costs makes the ppc concave
Adam Smith Invisible Hand Theory
capitalistic economy goes through this cycle, people will lose their jobs, and prices will lower
Kane "helping hand
government needs to step in
fiscal policy
Government policy that attempts to manage the economy by controlling taxing and spending.