Laws/Rule of Values
What is the law of supply?
the higher the price buyers are willing to pay, the greater the quantity…and the lower the price consumers are willing to pay, the smaller the quantity
What are the three factors that could lead to a change in supply even if price does not change?
Changes in technology, production costs, and the price of related goods
Substitute Goods
Goods that households may use in place of other goods
If demand for a product increases, which direction will the curve move?
What is something prices do?
provide incentives for manufacturers to make more products
What is the law of demand?
as the price of a good or service falls, people will demand more of it, and visa versa
What are at least two conditions that can cause change in demand?
Changes in people's incomes, the price of related goods, people's tastes and preferences, people's expectations
Market Equilibrium Point
the point at which supply and demand meet on price and quantity
Which way does a supply curve slope go (positive or negative)?
always positive
What are the three functions of prices?
Transmit information, provide incentives, and redistribute income
Who's rule of value states that values are not consistent from one person to another?
Carl Mender
How can changes in technology affect the change in supply?
make products less expensively and higher quality
Diminishing Marginal Utility
people tend to receive less and less additional satisfaction of any good or service as they obtain more and more of it during a specific period of time
Why is the demand curve always negative?
the lower the price the greater the demand
What are the three solutions to shortages?
decrease demand, increase supply, allow price to rise to MEP
Who's rule of value states that values are not even consistent for a single person?
William Stanley Jevons
Why is the supply curve slope always positive?
the greater the price buyers are willing to pay, the greater the quantity sellers will supply
Explain the hurricane example as it relates to supply
During the hurricane crisis, when state governments enforced a limit on prices that sellers could charge for their products, it eliminated the incentive for individuals and businesses to bring to the market greater quantities of necessary goods such as plywood, generators and ice.