Micro Unit 2

meeting of buyers and sellers

the amount of a good or service bought by consumers at a certain price over a given period of time

there is an inverse relationship between the price of a product and the quantity demanded - price goes up and quantity demanded goes down

Income Effect, Substitution Effect, Law of Diminishing Marginal Utility

TPIPE - Tastes and preferences, Population (market size), Income, Price of other related goods, Expectations of future price changes

Sum of individual demands

the amount of a good or service that producers are willing to supply at a given price over a certain period of time

there is a positive relationship between the price of a product and the quantity supplied of that product - price goes up and quantity supplied goes up

WANTS IT - Weather (for agriculture), Availability of resources, Number of firms, Taxes, Subsidies, Input costs, Technology

measures the responsiveness of the quantity demanded for a product to the change in the price of that product

[(New Qd - Old Qd)/Old Qd] / [(New Price - Old Price)/Old Price]

Top of the curve

The exact middle

Bottom of the curve

Steep slope

Slight slope

Vertical

Horizontal

Curved line (reverse J curve)

NIT NAB - Number and closeness of substitute goods, Income, Time, Necessity, Addictive, Brand strength

Price x Demand

TR will decrease in reduction of price

TR will increase in reduction of price

Everything that is produced is sold - where supply and demand curves meet

Where there is more being produced than being consumed

Where there is less being produced than demanded

(What the consumer is willing to pay - what is actually paid)

The difference between what the consumer is willing to pay and what they actually pay - above the equilibrium price

(The amount producers actually receive - the difference between the price that producers are willing to sell at)

The difference between the price that producers are willing to sell at versus the amount that they actually receive - below the equilibrium price

price decrease and quantity decrease - surplus

price increase and quantity increase - shortage

price increase and quantity decrease

price decrease and quantity increase

inefficient allocation of resources due to government intervention in a market

Legally imposed minimum under which price cannot fall - rests above the equilibrium; protects the producer

Legally imposed maximum above which price cannot rise - rests below the equilibrium; protects the consumer

Tax on production by the government - can ve per unit produced or on a percentage of the price; increases price

Payments made to producers to encourage production on the good; decreases price

Measures how sensitive our quantity demand is in comparison to the change of income - if you get paid more, does the demand increase?

Looks at the relationship between two different products

Elastic! Greater than 1

Inelastic! Less than 1