Microeconomics Chapter 3 Flashcards

Law of Supply

• Indicates that with all else held constant, higher prices result in greater quantities supplied.
• Conversely, lower prices lead to smaller quantities supplied.

Supply Curve

• Represents the minimum-supply-price curve, indicating the lowest price a seller is willing to accept.

Marginal Cost

• Relates to the minimum price at which a seller is willing to sell, depicted in the supply curve.

Price Impact on Supply

• An increase in cellphone prices results in a higher quantity supplied but does not alter overall market supply.

Substitutes in Production

• Refers to goods that can be produced using the same resources, allowing firms flexibility in production choices.

Equilibrium Price Dynamics

• At equilibrium price, buyers will pay the maximum they are willing for the last unit, while sellers will receive the minimum they will accept.

Equilibrium Quantity Formula

• Calculated using the formula (a−c)/(b + d).

Equilibrium Price Formula

• Determined by the formula (ad + bc)/(b + d).

Competitive Market Definition

• Characterized by numerous buyers and sellers, ensuring that no single entity can influence the market price.

Money Price

• Refers to the monetary amount that must be exchanged for a good.

Relative Price

• Defined as the ratio of one money price to another, reflecting the trade-offs between different goods.

Quantity Demanded

• Represents the total amount consumers intend to purchase over a specified timeframe at a particular price.

Law of Demand

• States that, all else being equal, higher prices lead to a lower quantity demanded, whereas lower prices encourage higher quantities demanded.

Demand Relationship

• Establishes the connection between the price of a good and the quantity demanded.

Demand Curve

• Visually represents the relationship between quantity demanded and price, holding all other factors constant.

Changes in Demand

• Change in Quantity Demanded: Movement along the demand curve, triggered by price changes.
• Change in Demand: A shift in the demand curve due to factors other than price.

Substitute Goods

• An increase in the price of a substitute good elevates demand for the primary good, shifting the demand curve to the right.

Complement Goods

• An increase in the price of a complementary good decreases demand for the related good, shifting the demand curve to the left.

Expected Future Prices

• Anticipation of higher future prices can lead to increased current demand, shifting the demand curve to the right.

Income Impact on Demand

• For normal goods: An increase in income raises demand, shifting the curve rightward.
• For inferior goods: An income increase causes a decrease in demand, shifting the curve leftward.