What is the law of supply?
the higher the price, the more firms are willing to supply
What is the law of demand?
amount people are willing to buy goes down as price goes up
What three conditions have to be met in order for there to be demand?
you have to want it, be willing to pay, and able to pay
What is a demand schedule?
table that shows the amount consumers are willing to buy at different prices
What is a supply schedule?
table that shows amount firms are willing to sell at different prices
What is quantity demanded?
the amount of the good that cosumers are willing to buy
What is quantity supplied?
amount of the good that firms are willing to sell
Describe the demand curve.
graph of demand schedule
Describe the supply curve.
graph of the supply schedule
What are some determinites of change in supply?
price of goods used in production
number firms in market
expectations of future prices
gov. regulations, subsidies, and taxes
What are some determinates of change in demand?
changes in preference
changes in population
expectations of future prices/ income
prices of substitute and completment goods and inferior goods
What is equilibrium?
quantity supplied equals quantity demanded
comsumers are willing to buy and producers are willing to sell
Where can market clearing price be found on a graph?
supply and demand curves intersect
What happens when quantity supplied equals quantity demand?
it has reached equillribrum
What is elastic demand?
a small change in price changes quantity demanded
What is inelastic demand?
change in price does not affect demand
What are the 3 types of businesses in the US?
sole proprietorship, partnership, corporation
What are the advantages of a sole proprietorship?
easy to get in and out of business
control over all profits and the way your business is run
pride of ownership
What are the disadvantages of a sole proprietorship?
difficult to raise captial
responsible for all losses
poor management skills
What are the advantages of a partnership?
easier to raise financial capital
partners combine their abilities
What are the disadvantages of a partnership?
dissagreements between partners
possible instability after death of partnet
What are the advantages of a corporation?
greater financial capital
What are the disadvantages of a corporation?
difficult to start
increased gov control
What are the four types of markets in the US?
Describe perfect comp.
no control over price
easy to enter industry
no non-price comp.
Describe monopolistic competition?
similar but not identical products
some control over price
fairly easy to enter market
lots of non-price comp.
few large firms
similar or different prodcuts
control over price
lots if products are different
fairily difficult to enter market
control over price
farily difficult to enter market
non-price comp. may very well exist
What is a market?
place where people buy and sell
What is a vertical merger?
merger between companies of different industries
What is a horizontal merger?
merger between companies of the same industry
What does the circular flow chart show?
flow of money
Who are the three actors in circular flow?
factor market and product market
What is a product market?
sells goods and services
What is a factor or resource market?
sells factors of production
What is barter?
the most primative form of trade
What are the disadvantages of barter?
it is hard to find a double coincidence of wants
What are the charactistics of money?
What are the functions of money?
standard of value
medium of exchange
way to store value
What type of buisness is the largest in the US?
What is it meant when it is said "money is the yardstick of value''?
money is a measure of quality
What is natural monopoly?
monopoly in an industry in which it is most efficient (involving the lowest long-run average cost) for production to be concentrated in a single firm.
What is a price floor?
prevent prices from falling
What is a price ceiling?
prevents prices of rising
What happens when the gov. set prices?
creates shortages or surpluses
What can cause supply curve to shift to the left?
exit of firms
when less is supplied
What can cause demand curve to shift left?
when demand falls
What can cause supply curve to shift right?
more is supplied at every price
What can cause demand curve to shift right?
more is demanded