Basic Terms/Market Supply & Demand
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the fundamental economic problem that human wants exceed the availability of time, goods, and resources
the study of how individuals and society choose to allocate scarce recources to satisfy unlimited wants
factors of production classified as: land, labor, and capital
a simplified description of reality used to understand and predict economic events
Law of Demand
states that there is an inverse relationship between the price and quantity demanded, ceteris paribus
is one that consumer buys more of as their income increases
Law of Supply
states that there is a derict relationship between the price and the quantity supplied
is one that there is an inverse relationship between changes in income and its demand curve
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
is any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged
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
when the price of a good is greater than the equilibrium price, there is an excess quantity supplied
A market condition existing at any price where the quantity supplied is less than the quantity demanded
- max price established by govt.
- above the price is illegal
- to be effective, the regulated price must be set "below" PE
- 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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