ch 4

Card Set Information

Author:
jillmray
ID:
67973
Filename:
ch 4
Updated:
2011-02-21 19:23:51
Tags:
economics
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Description:
market forces of supply and demand
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  1. perfectly competitive market
    • buyers and sellers so numerous that no one person can affect market price
    • all goods are exactly the same quality
  2. law of demand
    quantity demanded of a good falls when the price of a good rises
  3. demand curve has a ____ correlation to price
    negative
  4. demand curve shifters
    • # of buyers
    • income
    • price of substitutes (pizza and burgers)
    • price of complements (pb and j)
    • tastes
    • expectations
    • (NEVER A CHANGE IN PRICE THAT WOULD BE A MOVEMENT ALONG THE CURVE)
  5. normal good
    • positively related to income
    • make more money you buy more
  6. inferior good
    • negatively related to income
    • you make more you buy less
    • (bus rides)
  7. law of supply
    claim that quantity supplied of a good rises when the price of the good rises
  8. Supply is ___ correlated to price
    positively
  9. SUpply curve shifters
    • change in input prices (raw materials, wages)
    • better technology
    • # of sellers
    • expectations
  10. surplus
    when Qs is greater than Qd

    price falls until eqm is reached
  11. shortage
    when Qd is greater than Qs

    prices continue to rise until they reach eqm
  12. Facing shortages sellers raise the price causing
    Qd to fall and Qs to rise which reduces the shortage
  13. facing a surplus sellers try to increase sales by cutting prices this causes
    Qd to rise and Qs to fall reducing the surplus
  14. if both the supply and demand shift quantity will go up or down but the effect on price
    will be ambiguous

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