Circular Flow
Who owns the factors of production?
Households
What is the Law of Supply?
As price goes UP quantity supplied goes UP. As price goes DOWN quantity supplied goes DOWN.
What is the law of demand?
Price goes UP quantity demand goes Down. Price goes Down quantity demanded goes UP.
The equilibrium price for a good or service is determined by what?
where the supply curve and demand curve intersect.
Sole proprietorships face unlimited liability, which means the
Owner is personally responsible for debts incurred by the business.
Who buys the factors of production?
Businesses
Why does that Supply Curve slope upward?
Because Price and Quantity Supplied have a positive relationship.
Why does the demand curve typically slope downward?
There is an inverse relationship between price and quantity demanded.
If Demand increases what happens to price and quantity?
Price Increases Quantity Increases
In which type of market structure (competition) do multiple producers produce identical goods that can be easily substituted for one another?
pure competition
Where are goods and services bought and sold?
Product Market
If Technology is increasing what happens to supply?
It increases.
If the price of Milk increases what happens to the demand for cereal?
The demand for cereal would decrease
What effect does a price ceiling have on a market?
Results in a shortage
The primary difference between a sole proprietorship and a partnership is that
The sole proprietor has one owner and the partnership has more than one.
What do households receive for there factors of production?
Factor Payments (Income, Rent, Interest, Profit)
Following Hurricane Katrina in 2005, oil rigs and refinement plants were shut down. How did this affect the market for oil in the United States?
It decreased the supply of oil.
How does a decrease in consumer income influence the demand?
Demand would decrease.
Rent control is a common real-world example of this government-imposed limit, which keeps prices below equilibrium.
What is a Price Ceiling?
In which market structure (competition) does a firm have the GREATEST control over its product's price?
Monopoly
What do business generate in the product market?
Revenue
A printing company has just upgraded its capital equipment by buying a new press that increases the efficiency of the production rate by 50%.
What effect should the investment have on the company's Supply?
Supply increases
When the Price of a good changes what happens to demand?
Nothing. Quantity Demanded goes down. Demand stays the same
Suppose a new government Tax increases the cost of production for all bread manufacturers. How does this affect the equilibrium in the bread market?
Supply would decrease, price would increase, quantity would decrease.
A corporate owner’s — or shareholder’s — liability is limited to the value of his or her shares (investment) because a corporation..
Exists as a legal entity independent of its owners (who have limited liability)