Demand
The law of demand states that as price rises, this happens to quantity demanded.
decrease
The law of supply says that as price rises, quantity supplied does this.
increases
a produce that is sensitive to a change in price is defined as
elastic
when quantity demanded equal quantity supplied is called
equilibrium
Who was known for the concepts of laissez faire and the invisible hand?
Adam Smith
Name one determinant that can shift the entire demand curve.
MERIT
A shift to the left of the supply curve indicates what about supply?
decrease
A good or service that has an elasticity coefficient of 0.4 is categorized as
inelastic
If price is higher than the equilibrium price, the result would be a
surplus (QS>QD)
the difference between price and cost is that
price is set by consumers and producers
costs are on the producer
The price of Halloween candy increasing next week would affect the market demand curve to
increase today (right shift)
Name one factor that can shift the supply curve.
RENTER
Name an elastic good
food, clothes, (substitutable goods)
To fix a shortage a producer should
increase the price
What are two different price controls a government could implement on prices in a market?
price floor and price ceiling
an increase the price of a good would cause this type of change to the demand curve
increase in quantity demand
movement up the demand curve
The costs of flour got more expensive. This would cause the market supply curve to
decrease (left shift)
The elasticity of a good that has a 10% price cut causes a 20% rise in quantity demanded, is (elastic or inelastic?)
20/10=2 ELASTIC
If a hurricane destroys a tomato farm, what would the effect on the price and quantity market for ketchup?
Quantity decreases and price increases
This principle explains why the additional satisfaction from each extra slice of pizza decreases as you keep eating.
Diminishing Marginal Utility
If the price of socks increases, what would happen to the demand for shoes, a complement for socks?
Decrease in demand
If producers expect the price of pizzas to increase next month, this would affect the market supply by
an decrease (left shift)
A good that increases in price by 60% will decrease in the quantity demanded by 30% is categorized as (elastic or inelastic?)
30/60=0.5 INELASTIC
If the demand decrease and the supply increases, what would happen to the equilibrium price and quantity?
price is indeterminant and quantity decreases
What are 2 reasons why the demand curve is downward sloping?
Income Effect
Substitution Effect
Diminishing Marginal Utility