Term
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Definition
| The difference between the maximum amount consumers would be willing to pay and the amount they actually pay for the good. Consumer surplus equals a net gain for consumers. |
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Term
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Definition
| Height of demand curve at point at which the last unit was purchased. |
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Term
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Definition
| Equal to the combined value of all the units purchased. This is the sum of all the heights of the demand curve, from each point upward on the x-axis. Add those! Total value can be far greater than the marginal value of last unit consumed. When additional units are available at a price, the marginal value of a good may be quite low. When they buy a lot for a low price, the marginal value is low. Consumers will buy until price and marginal value are equal. Total water has a higher worth than total diamonds. |
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Term
| Why do demand curves slope downward? |
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Definition
| The availability of substitutes. |
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Term
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Definition
| SMall price change causes rather large change in amount purchased. |
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Term
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Definition
| Even when a large price change occurs, quantity demanded doesn't change a whole lot. |
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Term
| Is a steeper demand curve more or less elastic? |
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Definition
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Term
| A "perfectly" inelastic demand curve |
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Definition
| means quantity demanded never changes regardless of price. |
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Term
| Demand vs. Quantity Demanded |
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Definition
| Demand curve shows what effect a price change will have on the quantity demanded of a good. |
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Term
| Quantity Demanded only changes when... |
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Definition
| A change in price of good occurs; movement along the demand curve is what it is. |
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Term
| Factors that shift Demand Curve. |
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Definition
1. Changes in consumer income.
2. Changes of number of consumers in the market.
3.Changes in the price of a related good.
4. Changes in expecations: about future. If they expect hurricane, food purchases will rise. Expectations of economy's direction will alter, too. If pessimistic, demand will fall. Expected future price is strongest.
5. Demographic changes.
6. Changes in taste and preference. New info. changes preference. When people change, taste and preference changes. Trends. Advertising. |
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Term
| Producer choice and the law of supply |
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Definition
| Producers convert resources to goods by doing these: organizing resources; transforming them into goods and services; and selling them. |
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Term
| Producer choice and the law of supply |
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Definition
| Producers convert resources to goods by doing these: organizing resources; transforming them into goods and services; and selling them. |
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Term
| Opportunity cost of production |
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Definition
| Sum of producer's cost of each resource used to produce a good, including the alternative uses for those resources--buildings, equipment, financial resources. |
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Term
| Height of supply curve shows... |
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Definition
| minimum price necessary to induce producers to supply add. unit.; and the opportunity cost of producing that add. unit. |
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Term
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Definition
| If you're offered $750 and you would have taken $500, you receive $250 more than your minimum price. This is a producer surplus. |
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Term
| Changes in supply are caused by: |
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Definition
| Changes in resource prices. 2. Changes in tech. 3. Elemtns of nature and political disruptions. 4. Changes in taxes. |
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