Chapter 3 & 4

Economics 201 with Ballard at Michigan State University

About this deck

By: Lauren Kubert
Textbook: Real Economics for Real People
Created: 2011-09-26
Size: 32 flashcards
Views: 6

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supply

behavior of sellers

demand

behavior of buyers

market

any organized system of communication between buyers and sellers to facilitate transactions

influences on buyers

price of good
everything else (other prices, expectations, income, etc.)

demand schedule

table of price and quantity demanded, holding other influences constant

demand curve

graph of price and quantity demanded, holding other influences constant

law of demand

all else equal, if price increases, quantity demanded decreases

inverse relationship
if obeyed, the demand curve slopes downward

influences on sellers

price of good
everything else (input cost, technology, expectations, etc.)

law of supply

all else equal, if price increases, quantity supplied increases.

if obeyed, the supply curve slopes upward

market demand curve

the horizontal sum of individual demand curves

market supply curve

the horizontal sum of supply curves of individual firms

market demand + market supply schedules

P ↓, Qd ↑, Qs ↑ = shortage
P = Qd = Qs = equilibrium
P ↓, Qd ↑, Qs ↓ = surplus

surplus

pressure for price to fall

shortage

pressure for price to rise

equilibrium

no pressure for price to change

demand curve

constructed by changing price, holding constant other influences

if other influences change, then shift to new demand curve (Δ in D)
if price changes, then move along existing curve (Δ in Qd)

supply curve

constructed by allowing price to change, holding constant other influences

if price changes, then move along existing curve (Δ in Qs)
if other influences change, then shift to new supply curve (Δ in S)

normal goods

if income increases, demand increases

inferior goods

if income increases, demand decreases

complementary goods

price 1 increases
price 1+2 increases
demand 2 decreases

substitutes

price X increases
demand Y increases

expectation of price increase

demand today increases
price today increases
ex.: speculative bubble

demand and supply decreases

quantity decreases
price varies

price control

laws outlawing certain prices

price ceiling

maximum legal price

price floor

minimum legal price

if equilibrium > price ceiling

= shortage
amount actually sold = Qs ceiling

if equilibrium < price floor

= surplus
actual quantity = Ld minimum
steep curve = smaller surplus
flat curve = larger surplus

About this deck

By: Lauren Kubert
Textbook: Real Economics for Real People
Created: 2011-09-26
Size: 32 flashcards
Views: 6

About StudyBlue

“Simply amazing. The flash cards are smooth, there are many different types of studying tools, and there is a great search engine. I praise you on the awesomeness.”
Dennis