Supply and Demand
if total revenue on a product drops, what are producers likely to do
produce less
What would be a substitute for tea?
coffee, hot chocolate
Where is equilibrium?
where the quantity supplied equals the quantity demanded
total costs are determined by
adding fixed and variable costs
a market with only one producer
monopoly
increased gov regulation on a product would do what to the supply curve
shift it left
Give an example of a highly inelastic good.
medicine, gas, etc
What effect does a high price have on consumers?
buy less
A surplus is created by _________.
A price floor
Benefit of a market
Economies of scale- (can often produce a good at the lowest price)
a good corn harvest would likely do what to the price of corn
decrease it
What would be a complement for hot cocoa?
marshmallows
What effect does a high price have on producers?
incentivizes production
Price ceilings and floors keep the price from reaching what?
equilibrium
In perfect competition, what sets the price?
Supply and demand
How would a government granting a new subsidy shift the supply curve for that product?
to the right
When an highly inelastic good gets more expensive, what happens to the demand for other products?
goes down
Explain diminishing marginal utility.
Who benefits the most from a price ceiling?
the consumers (if they can get the product)
When price is not used to distribute goods/determine what is produced, who determines it instead?
the government
How is supply and demand a little like arm wrestling?
Supply and demand fight each other for opposite goals until they reach a compromise (equilibrium price)
Demand is elastic when what are available
other substitutes
Describe the advantages of prices as a way of distributing goods in a market.
Neutral, flexible, familiar, and efficient
How do you know what stage of production you are in?
by what the marginal product is doing (increasing, increasing but at a decreasing rate, or causing total product to go down)
A market failure results from
too little competition
too little knowledge of market conditions
immobile resources
too few public goods