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Ag Econ
Chapter 3
| Term/Question | Definition/Answer |
|---|---|
| Demand | amount of good/service consumer willing and avle to purchase @ each price goes down to the right |
| Quantity Demanded | total # units good/service consumer willing to purchase @ given price $ go up = Q Demanded go down $ go down = Q Demanded go up |
| Price | buyer pays for unit of good/service |
| Law of Demand | keeps all variables affect demand constant |
| Demand Schedule | table showing range of prices for certain good/service and quantity demanded @ each price |
| Demand Curve | graphic representation of relationship betwix price and quantity demanded of good/service |
| Demand Curves = | downward slope |
| Downward slope = | law of demand; inverse relationship prices/quantity demanded |
| Supply | amount good/service willing to supply @ each price goes up to the right |
| Quantity Supplied | total # units good/service producers willing to sell @ given price $ go up = Q Demanded go up $ go down = Q Demanded go down |
| Law of Supply | assumes all variables affect supply held constant |
| Supply Schedule | table shows quantity @ range of different prices |
| Supply Curve | graphic of relationship betwix price and quantity; vertical/horizontal |
| Supply Curve = | upward curve |
| Upward curve = | law of supply; higher price lends to higher quantity supplied/vise versa |
| Equilibrium | combination of price/quantity where no economic pressure from surpluses/shortages cause price/quantity to change Q Demanded = Q Supplied |
| Right Shift = | Increas |
| Left Shift = | Decrease |
| Equilibriuim Price | price where quantity demanded = quantity supplied |
| Equilibrium Quantity | quantity demanded/supplied = for price level |
| Surplus/Excess Supply | existing price quantity supplied exceeds quantity demanded; more supplied, not enough buyers |
| Shortage/Excess Demanded | existing price quantity demanded exceeds quantity supplied; not enough supplied to meet the amount demanded |
| Price > equilibrium = | Q Supplied > Q Demanded; Excess supply |
| Price < equilibrium = | Q Demanded > Q Supplied; Excess Demanded |
| Ceteris paribus | latin phrase: "other things being equal"; supply/demand based on assumption that all is equal |
| Increase Demand = | Right Shift |
| Decreased Demand = | Left Shift |
| Shift in Demand | change in economic factor causes difference quantity to be demanded @ every price |
| What can cause a shift in demand? | Income, price substitute/complement changes, change tastes/preferences, future expectation changes, changes in composition of population, |
| Normal Good | product demand goes up when income rises; vise versa; organic food/vacation trends |
| Inferior Goods | product demand goes down when income rises, rises; vise versa; instant noodles/secondhand clothing |
| Substitute | good/service used in place of another good/service; butter/margerine; coffie/energy drinks |
| Compliments | goods services often used together so consumption of one enhances consumption of another; livestock/feed; seed/ferilizer |
| What can contribute to a right shift? | taste shift to greater popularity; population likely to buy rises; income rises (normal good); Substitute Price Rise; Compliments Price Falls Future expectations encourage buying |
| What can contribute to a left shift? | Taste shift to lesser popularity; population likely to buy drops; income drops (normal good); Price subsitute falls; compliments price rises; Future expectations discourage buying |
| Supply Curve = | used to show minimum price firm will accept to produce given quantity of output |
| Supply Price = | cost production/desired profit equal price firm will set for project Cost of production goes up = price of product goes up |
| Good time go right = | increase supply |
| bad times go left = | decrease supply |
| Shift in Supply | change in economic factor (other than price) causes different quantity to be supplied @ every price; price goes up, curve moves up |
| Inputs/Production Factors | combination of Labor, materials, and machinery used to produce goods/services |
| What factors may affect increase/decrease of supply? | Natural Condidtions; Input Prices; Technology; Government Policies |
| What are the 4 steps to figuring out whether an economic event affected the equilibrium price/quantity? | Draw Supply/Demand before change Decide how the econ changed effected supply/demand Effect causes a curve shift left or right; sketch on diagram Identify new equilibrium; compare to original |
| Shift in one = | movement in another; movements DIFFERENT than shifts |
| Price Control | laws that gov. enact to regulate prices |
| Price Ceiling | Price doesn't rise above certain level; legal max price anyone pays for good/service Ex. Rent Control |
| Price Floor | price no go below certain level; lowest price ppl legally pay for good/service Ex. Euro Wheat Prices |
| Consumer Surplus | amount individuals willing to pay - amount paid; area above market price, below demand curve price above equilibrium |
| Producer Surplus | price producer actually received - price willing to accept; area betwix market price and segment supply curve below equilibrium price below equilibrium |
| Social/economic/total surplus = | consumer + producer surplus |
| Deadweight loss | loss social surplus occurs when market produces inefficient quantity |
Created by:
horktera
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