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Chapter 3
| Term | Definition |
|---|---|
| demand | the amount of good or service that a consumer is willing and able to buy at various possible prices during a given time period |
| law of demand | an increase in a goods price causesa decrease in the quantity demanded and that a decrease in price causes a decrease in quantity |
| purchasing power | the amount of money that people have available to spend on goods and services |
| income effect | any increase or decrease in comcumers purchasing power caused by a change in price |
| substitution effect | describes the tendency of consumers to substitute a similar lower priced product for another proudct that is relatively more expensive |
| diminishing mariginal utility | the mariginal or additional utility consumed diminishes or lessens with each additional unit |
| demand schedule | the price of a good or service and the quantity that consumners demand |
| demand curve | a way to show the relationship between the price of a product and the quantity demanded |
| determinance of demand | consumers tastes and prefrences, market size, income, prices of related goods, consumers expectations |
| substitute goods | goods that can be used to replace the purchase of similar goods when prices rise |
| complementary goods | goods that are commonly used with other goods |
| elasticity of demand | the degree to which changes in a goods price effect the quantity demanded |
| law of supply | states the producer supply more goods and services when they csn sell them at higher prices and fewer goods and services when they must at lower prices |
| profit motive | the desire to make money |
| cost of production | these costs include wages and salarie, rent, interest on loans, bills for electricity and raw materials |
| supply curve | another way to show the relationship between the price of a good and the quantity supply |
| determinant of supply | non priced factors can shift an enitre suplly curve of a production |
| tax | is a required payment of money to the government to hepl fund government services |
| law of diminishing returns | describes the effect that varying the level of an input has on a total marginal product |
| variable cost | change as the level of output changes |
| mariginal costs | the additional costs of producing one more unit of output |
| market failure | limitations |
| externality | side effects |
| public good | any good or service that consume by all members of a group |
| market equilbrium | when the quantity supplied and the quantity demanded for a product are equal at the same price |
| surplus | when the quantity supply exceed the quantity demanded |
| shortage | when the quantity demanded exceeds the quantity supply |
| price ceiling | a government regulation that esatblishes a maximum for a particular good |
| price floorq | a goverment regualtion that establishes a minimum level for prices |
| minimum wage | another example of a price floor |
| rationing | a system in which a government decides how to distribute a product |
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BigDawg1
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