Basic Terms/Market Supply & Demand

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Author:
Kencollins08
ID:
134008
Filename:
Basic Terms/Market Supply & Demand
Updated:
2012-02-09 11:30:22
Tags:
Econ1
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Description:
Basic econ terms and concepts
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  1. Scarcity
    the fundamental economic problem that human wants exceed the availability of time, goods, and resources
  2. Economics
    the study of how individuals and society choose to allocate scarce recources to satisfy unlimited wants
  3. Resources
    factors of production classified as: land, labor, and capital
  4. Model
    a simplified description of reality used to understand and predict economic events
  5. Law of Demand
    states that there is an inverse relationship between the price and quantity demanded, ceteris paribus
  6. Normal Good
    is one that consumer buys more of as their income increases
  7. Law of Supply
    states that there is a derict relationship between the price and the quantity supplied
  8. Inferior Good
    is one that there is an inverse relationship between changes in income and its demand curve
  9. Substitute Good
    is one that competes with another good for consumer purchases. As a result, there is a derict relationship between a price change for one good and the demand for its "competitor" good
  10. Market
    is any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged
  11. Complementary Good
    is one that is jointly consumed with another good. As a result, there is an inverse relationship between price change for one good and the demand for its "go together" good
  12. Surplus
    when the price of a good is greater than the equilibrium price, there is an excess quantity supplied
  13. Shortage
    A market condition existing at any price where the quantity supplied is less than the quantity demanded
  14. Price Ceiling
    • max price established by govt.
    • above the price is illegal
    • to be effective, the regulated price must be set "below" PE
  15. Price Floor
    • minnimum price established by the govt.
    • below the price is illegal
    • to be effective, regulated price must be set "above" PE

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