1
This is the diminishing value of goods that is caused by wear and time.
What is depreciation?
These are used by consumers and producers to determine how much of a good to buy or sell at a given price and time.
What are market signals?
This is when quantity supplied of a good is greater than the quantity demanded at a given price.
What is a surplus?
This is the price at which a good could be sold in an open market.
What is market price?
This occurs when the quantity demanded exceeds the quantity supplied at a given price.
What is a shortage?
This is the excess of a producer’s total revenue over his total expenditures.
What is profit?
This is when quantity demanded and quantity supplied are equal.
What is equilibrium?
This says that when the price of a good falls, consumers tend to buy more of that good or other items because they can do so without giving up anything.
What is the income effect?
The availability of substitutes is a major reason why the demand for most goods is this.
What is elastic?
The amount of money that a buyer pays the seller for a particular item is the item’s this.
What is price?
If the demand for a car dealer’s new convertibles decreased but he still wanted to sell the same amount of cars, he would have to do this to his prices.
What is decrease?
Explain the differences in how prices are determined in market economies and in command economies. What are the results of each?
In command economies, the prices are set by the ruler. This frequently results in both surpluses and shortages of goods. In market economies, supply and demand sets the prices. This results in prices at an equilibrium. This means suppliers and consumers are willing to buy and sell goods.
How do the laws of supply and demand restrict many companies from making large profits in a competitive free enterprise system?
Without interference from the government or such, the laws of supply and demand are allowed to work. A business can’t raise the prices charged for products above that which its competitors are charging for similar products. If that happens, people will buy their goods somewhere else, causing the business that overcharges to fail. Businesses try to keep their prices as low and as competitive as possible.