Chapter 4 & 5 Notes

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Chapter 4 Vocab Demand- the desire to own something and the ability to pay for it Law of demand- consumers will buy more of a good when its price is lower and less when its price is higher Substitution effect- when consumers react to an increase in a goods price by consuming less of that good and more of a substitute good. Income effect- the change in consumption that results when a price increase causes real income to decline Demand schedule- a table that lists the quantity of a good a person will buy at various prices in the market Market demand schedule- a table that lists the quantity of a good all consumers in a market will buy at each different price Demand curve- a graphic representation of a demand schedule Ceteris paribus- a Latin phrase that means all other things held constant Normal good- a good that consumers demand more of when their incomes increase Inferior good- a good that consumers demand less of when their incomes increase Demographics- the statistical characteristics of populations and population segments, especially when used to identify consumer markets Complements- two goods that are bought and used together Substitutes- goods that are used in place of one another Elasticity of demand- a measure of how consumers respond to price changes Inelastic- describes demand that is not very sensitive to price changes Elastic- describes demand that is very sensitive to a change in price Unitary elastic- describes demand whose elasticity is exactly equal to one Total revenue- the total amount of money a company receives by selling goods or services 5 Vocab

Chapter

Supply- the amount of goods available Law of supply- producers offer more of a good as its price increases and less as its price falls Quantity supplied- the amount that a supplier is willing and able to supply at a specific price Supply schedule- a chart that lists how much of a good a supplier will offer at various prices Variable- a factor that can change Market supply schedule- a chart that lists how much of a good all suppliers will offer at various prices Supply curve- a graph of the quantity supplied of a good at various prices Market supply curve- a graph of the quantity supplied of a good by all suppliers at various prices Elasticity of supply- a measure of the way quantity supplied reacts to a change in price Marginal product of labor-the change in output from hiring one additional unit of labor Increasing marginal returns- a level of production in which the marginal product of labor increases as the number of workers increases Diminishing marginal returns- a level of production at which the marginal product of labor decreases as the number of workers increases Fixed cost- a cost that does not change, no matter how much of a good is produced Variable cost- a cost that rises or falls depending on the quantity produced Total cost- the sum of fixed costs plus variable costs Marginal cost- the cost of producing one more unit of a good Marginal revenue- the additional income from selling one more unit of a good; sometimes equal to price Average cost- total cost divided by the quantity produced Operating cost- the cost of operating a facility, such as a factory or a store

Subsidy- a government payment that supports a business or market Excise tax- a tax on the production or sale of a good Regulation- government intervention in a market that affects the production of a good.

3/21/2013 7:25:00 AM

3/21/2013 7:25:00 AM