Factors of Production
This FoP involves the space needed to produce a product and the natural resources used to make a product
Land
System of trade where you exchange one good/service for another good/service
Barter system
What is the motive for all businesses
Profit (money)
What does inverse mean
opposite
Market equilibrium is the point at which ....
Quantity supplied is equal to quantity demanded
This FoP involves the people needed to produce a product
Labor
System of trade where money is exchanged for a good or service (starts with a C)
Currency system
What is the relationship between price and quantity supplied
As price goes up, so does quantity supplied
What is the relationship between price and quantity demanded
As price goes up, quantity demanded goes down
Market disequilibrium is when...
1. Qs and Qd are not equal
OR price is above/below the equilibrium price
Capital
What does it mean to have a "specialization"?
To focus on producing one thing or service
A new fast-food grill allows McDonald's to make burgers 50% faster. What happens to supply and price?
Supply increases due to the greater efficiency. Prices might do down a bit.
Describe what happens to the demand for a product if it's complementary good increases in price
Demand for the product decreases
Is price above/below equilibrium price when there is a shortage of a product? Explain Qs vs Qd
Price is below equilibrium. The amount people want (Qd) is greater than the amount produced (Qs)
Which factor of production makes labor more efficient?
Capital
Why does trade make us all better off?
Voluntary Exchange is an agreement made by two parties where both are getting what they want
Businesses do not control the prices of their product, nor do consumers. Price is established by the ________.
Market
Describe what happens to the demand for Coke if the price of Pepsi goes up.
Substitute goods- if it is more expensive to buy Pepsi, people will buy more Coke, increasing the demand for Coke.
Is price above/below equilibrium price when there is a surplus of a product? Explain Qs vs Qd
Price is above equilibrium. The amount people want (Qd) is less than the amount produced (Qs)
Why does specialization give people more leisure time?
You don't have to produce everything on your own so you don't have to spend all day making your products, growing your food, etc.
New companies compete with you. Describe what happens to supply and as a result, the price of your product.
Supply increases because more companies are producing, prices go down because there is more supply available
Over the summer, a college town loses all of its college students when they go back to their home towns. What does this do for the demand for takeout food? (identify the force of demand and whether demand increases/decreases)
# of customers in the market, demand decreases for takeout food.
Let's say there is a surplus for a product. Using the laws of supply and demand, describe how the price goes from being too high back to equilibrium.
Price is too high - quantity supplied is greater than quantity demanded. Businesses have made too much of their product. To attract customers, businesses will lower their prices. Because prices are lower (law of demand), consumers will buy more, increasing quantity demanded. This will eventually bring the price to equilibrium where Qs = Qd