BASIC ECONOMIC CONCEPTS
Economics is the study of how people make choices under ______________.
scarcity
If demand increases, the curve shifts…
Right
If a firm expects prices to rise in the future, current supply will…
Decrease
The point where supply equals demand.
equilibrium
If demand changes A LOT when price changes, it is…
Elastic
A benefit or cost that motivates behavior.
Incentive
The price of coffee rises, and demand for tea increases. These goods are…
substitutes
If production costs increase, supply shifts…
Left
If demand increases, equilibrium price will…
increase
If demand barely changes when price changes, it is…
Inelastic
The next best alternative you give up when making a decision.
Opportunity Cost
If the price of a substitute rises, demand for this good will…
Rise
A new technology makes production cheaper. Supply will shift:
Right
When price is ABOVE equilibrium, this occurs.
Surplus
A necessity with few substitutes (like insulin) is…
Inelastic
The price where quantity demanded equals quantity supplied.
equilibrium price
A change in quantity demanded caused ONLY by a change in price.
movement along the demand curve (no shift in demand)
A tax on producers will shift the supply curve…
Left (decrease)
When price is BELOW equilibrium, this occurs.
Shortage
A good with many substitutes is likely…
Elastic
Measures how much buyers respond to a change in price.
Elasticity
A decrease in income causes demand for a good to increase. This good is an…
Inferior good
Three factors that shifts supply:
Input costs, technology, number of sellers, expectations, taxes/subsidies, and natural events
Adam Smith's term for why markets tend to move toward equilibrium without government intervention
invisible hand
A company is deciding whether to raise prices. What must be true about demand for this strategy to increase total revenue?
demand must be inelastic