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| Term | Definition |
|---|---|
| demand | the amont of a good or service that consumers are willing and able to buy at various prices during a given period |
| 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 prices |
| purchasing power | the amount of income that people have availiable to spend on goods and services |
| income effect | the effect that a change in an items price has on consumrs ability to purchase goods |
| substitution effect | consumers tendancy to substitute a lower price good for a similar higher priced one |
| diminishing marginal utility | the natural decreases in the utility of a good or service as more units of it are consumed |
| demand schedule | a table that shows the level of demand for a particular item at various prices |
| demand curve | a graphic representation of a demand schedule showing the relationship between the price of an item and the quantity demanded during a given period with all other things being equal |
| determines of demand | a non priced factor that influences the amount of demand for a good or service |
| substitute goods | a product that purchasers use in place of another product particularly if a price of the other products rises |
| complementary goods | a good that that is commonly used with another good and for which demand increases (or decreases) when the demand for the related good increases( or decreases) |
| elasticity of demand | the degree to which changes in the price of a good or a service affect quantity demand |
| 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 prices |
| profit motive | the desire to make money |
| cost of production | the total cost of materials, labor, and other inputs required in the manufacture of a product |
| supply curve | a graphic representation of a supply schedule showing the relationship between the price of an item and the quantityy supply during a given time period with all other things being equal |
| tax | a required payment to a local, state, or national government usually made on some regular basis |
| law of deminishing returns | 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 fixed costs accept for wages and the material cost |
| variable cost | a cost of doing business that changes directly with a change in the level of output typically rising and dropping as production increases and decreases |
| marginal cost | the cost of producing one additional unit of output |
| market failure | a flaw in a price system that occurs when some cost have not been acounted for anf therefore are not properly distributed |
| externality | an effect that an economic activity has on people an businesses 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 supply 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 exceeds a quantity demanded |
| shortage | a situation in which the quantity demanded of a good or resource exceeds 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 a government or other institution decides how to distribute a good or service, rationing is usually the result of limited supply |
Created by:
econwestside
Popular Economics sets