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Chapter 3-5 vocab

vocab for study guide

TermDefinition
Demand The amount of a good or service that consumers are willing and able to buy at various prices during the given timeD.
Law of Demand The principle that, all other factors being equal, consumers will purchase (demand) more of a good at lower prices and less of a good at higher pricesLAD.
Purchasng Power The amount of income that people have available to spend on goods and servicesPP.
Income Effect The effect that a change in an item's price has on consumer's ability to purchase goodsIE.
Substitution Effect Consumer's tendency to substitute a lower-priced good for a similar, higher priced oneSE.
Diminishing Marginal Utility The natural ldecreases in the utility of a good or service as more units of it are consumedDMU.
Demand Schedule A table that shows the level of demand for a particular item at various pricesDS.
Demand Curve A graphic representation of a demand schedule, showing the relatinship between the price of an item and the quantity demanded during a given period, with all other things being equalDC.
Determinants of Demand A nonprice factor that influences the amount of demand for a good or serviceDOD.
Substitute Goods Products that purchasers use in place of another productSG.
Complementary Goods Goods that sre commonly used with another good and for which demand increases (or decreases) when the demand for the related good increases (or decreases)CG.
Elasticity of Demand The degree to which changes in the price of good or a service affect quantity demandedEOD.
Law of Supply The principle that producers will supply more of a product or service at higher prices but less of a product or service at lower pricesLOS.
Profit motive The desire to make money.
Cost of Production The total costs of materials, labor, and other inputs required in the manufacture of a product.
Supply Curve A graphic represenation of a supply schedule, showing the relationship between the price of an item and the quantity supplied duting a given time period, with all other things being equal.
Determinant of Supply A nonprice factor that influences the available supply of a good or service.
Tax A required payment to a local, state, or national government, usually made on some regular basis.
Law of Diminishing Return The principle that as more of one input (such as labor) is added to a fixed supply of other resources (such as capital), productivity will increase up to a point, after which the marginal product will diminish.
Overhead The sum of a business's fixed costs except for wages and the material costs.
Variable Cost A cost of doing business that changes directly with a change in the level of output, typically rising and dropping as productin increases and decreases.
Marginal Cost The cost of producing one additional unit of output.
Market Failure A flaw in in a price sysyem that occurs when some costs have not been accounted for and therfore are not properly distributed.
Externality AN effect that an economic activity has on people and business that are neither producers nor consumers of the good or service being produced. An externality may be either positive (beneficial) or negative (harmful).
Public Good Any good or service that is consumed by all members of a group, regardless of who has helped pay for it.
Market Equilibrium The point at which the quantity supplied and quantity demanded for a product are equal at the same price.
Surplus A situation in which the quantity supplied of an item at a given price exeeds the quantity demanded.
Shortage A situation in which the quantity demanded of a good or resource exeeds the quantity supplied.
Price Ceiling A government regulation that sets a maximum price for a particular good.
Price Floor A government regulation that sets a minimum price for a particular good.
Minimum Wage The lowest hourly wage rate that an employer legally can pay a worker, as established by federal law.
Rationing A system by which the government or other institution decide how to distribute a good or service; rationing is usually the result of limited supply.
Created by: wendylopez
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