# Pre HSE and Video - Economics - Unit 4-2 Flashcards

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Pre HSE and Video - Economics - Unit 4-2
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1

The Law of Demand

There is an inverse relationship between price and quantity demanded

2

What are the 3 reasons for the Law of Demand?

Substitution Effect, Income Effect, Law of Diminishing Marginal Utility

3

Substitution Effect

Changes in price motivate consumers to buy relatively cheaper substitute goods

4

Income Effect

Changes in price affect the purchasing power of consumerâ€™s income

5

Law of Diminishing Marginal Utility

As you continue to consume a given product, you will eventually get less additional utility (satisfaction) from each unit

6

What are the 5 shifters of demand?

Tastes/Preferences, Number of consumers, Price of Related Goods, Income, Expectations

7

The Law of Supply

There is a direct relationship between price and quantity supplied

8

What are the 5 shifters of Supply?

Price of Resources, Number of Producers, Technology, Taxes & Subsidies, Expectations

9

Equilibrium

Quantity demanded equals quantity supplied

10

Surplus

Quantity supplied is greater than quantity demanded

11

Shortage

Quantity demanded is greater than quantity supplied

12

Supply

the amount of a good or service that is produced

13

Demand

the amount of good or service that consumers want

14

Quantity Supplied

the amount of something that producers are willing to sell at a certain price

15

Quantity Demanded

the amount of something that consumers are willing to buy at a certain price

16

As supply goes up, the supply curve shifts to the _______________________, and the price goes ____________________.

right, down

17

As supply goes down, the supply curve shifts to the _______________________, and the price goes ____________________.

left, up

18

As demand goes up, the demand curve shifts to the _______________________, and the price goes ____________________.

right, up

19

As demand goes down, the demand curve shifts to the _______________________, and the price goes ____________________.

left, down

20

Supply Shock

occurs when there's a sudden shortage of some good