Economics is the study of how individuals and societies allocate their limited resources in attempts to satisfy their unlimited wants.
Utility is the economic term for the satisfaction obtained from consumption of a good (or service).
The 3 basic resources in economic are:
Natural resources (e.g. land)
Labor
Capital (i.e. money, physical resources)
There's really only 2 basic resources; Natural resources (e.g. land) and Capital (i.e. money, physical resources).
Cost is proportional to constraints.
Law of diminishing marginal utility: the satisfaction received by obtaining one more unit of a good declines as one consumes more of it.
___________ is determined by marginal utility – the satisfaction obtained from receiving one more of a good (or service).
Value
Cost
Supply
Free market
Law of ___________: the quantity demanded of a commodity is inversely proportional to its price. (i.e. the higher the price, the less of it one wants.)
demand
supply
diminishing marginal utility
Change in ________________ moves along the demand curve.
quantity demanded
Change in __________ is when the entire curve shifts.
Factors that change demand: (check all that applies)
Prices of related goods (substitutes or complements)
Money income of the consumer (Superior goods or inferior goods)
Number of consumers in the market
Attitudes, tastes, and preferences of the consumer
Consumer expectations with respect to future prices and incomes
Law of supply: as the price that individuals are willing to pay for a product increases, the more of the product that will be supplied.
Change in _______________ moves along the supply curve.
quantity supplied
Change in ___________ is when the entire curve shifts.
Factors that change supply include? (check all that applies)
Techniques of production, including technology
Number of sellers in the market (more sellers = more supply)
Resource costs (material and wages) (cost increase, seller makes less, less incentive to produce)
Sellers’ expectations
Prices for related goods
The __________________ is that price where the demand curve and supply curve intersect.
market equilibrium price
price system
The _________ system – the interaction of supply and demand – determines how economic resources are allocated.
price
market equilibrium
Elasticity measure the responsiveness of consumer demands to a change in price.
What type of elasticity of demand is this?
Demand is _______ if an increase in price causes the quantity demanded to decrease enough to result in a decrease of total revenue. ￪P,￬R
Elastic demand
Inelastic demand
Unitary demand
Demand is _________ if total revenue is unchanged regardless of changes in price. Not present in the real world.
Demand is ________ if an increase in price does not result in a sufficient decrease in quantity demanded to prevent a decrease in revenue. ￪P,￪R
Determinants of elasticity of demand: -Availability of substitutes -Price relative to income -Number of alternatives
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