Definitions
the relationship between a good's price and the amount that people are willing to buy
demand
Why were the pine boards valuable to the merchant? hint what did he want to do with the boards
he needed to build an addition to his warehouse
one of the most important principles in economics. Explains the inverse relationship between the price of a good and the amount that people choose to buy
the direct relationship between the price of a good and the amount other suppliers will make available
"other things remaining equal, as the price of a good increases, the quantity supplied also increases in a free market economy"
Law of supply
economics
the relationship between a good's price and the amount that producers are willing to provide for consumers
supply
what type of value did the molasses and boards have?
value in exchange and value in use
Other things remaining equal, as the price of a good increases, the quantity demanded decreases in a free market economy
Law of Demand
a list of numbers that compares price with quantity supplied
supply schedule
What is the result of price fixing by governments, resulting in serious damage to economics.
either overproduction or underproduction of goods
value directly related to the benefits their owners receive through their use
value in use
How often does value in exchange vary?
day to day
lower prices give the consumer expanded buying power, or seemingly larger income.
if prices rise, the consumer can no longer buy as much as he once did, which has the same effect as if his income were reduced
Income Effect
governments sometimes give businesses money called this to encourage production
subsidy
when governments place a limit on how high a producer may charge for his product it is called a __________
price ceiling
a particular good is worth in exchange for some other good
value in exchange
was no money changing hands as currency the norm in Boston in 1670? why?
yes because currency was scarce
the effect that states people tend to substitute less expensive goods for ones whose prices have risen
substitution effect
when there is a ________ the whole supply curve shifts
change in supply
price levels set above the equilibrium prices
price floors
the amount of money a buyer pays the seller for a particular item
price
If the Farmer already had 2 barrels of molasses at home, would he have still made the trade with the Merchant? which phenomenon supports this?
Probably not because of the diminishing marginal utility phenomenon
How many key factors can shift the demand curve?
5
when there is a change in the __________, it is illustrated by moving from one point on a supply curve to another point on the same curve
quantity supplied
why does increasing minimum wage do more harm than good?
it costs producers more to supply their goods to the public, because producers have to pay their workers more, forcing up productions costs.
they are forced to increase prices charged for goods.
all consumers have to pay more for what they buy which cancels out the pay increase