microeconomics bc less is more

• What _____ and ________ should an economy produce?

  goods and services
• ___ should goods and services be produced?

  How
• ___ should get the goods and services produced?

  who
• Law of Demand: Increase in price, contraction in quantity demanded
• The two factors that encourage us to produce are willingness and ability.
• Moving along a demand/supply curve

  expansion/contraction
• The satisfaction we gain from consumption

  utility
• Nature of the law of demand

  inverse
• Two items that must be used in conjunction

  complements
• Fee for buying a product

  interest
• The trust a buyer has in the company

  Consumer confidence
• Linear demand function


  a-bp
• autonomous level of demand

  quantity demanded when price is zero
• law of supply: increase in supply, increase in quantity supplied
• What is the relationship of the law of supply?

  direct
• Motive behind the law of supply 


  profit
• Government taking a percentage of earnings

  tax
• seasonal factors


  droughts, famines etc
• government subsidies


  government paying a company to make prices cheaper
• productivity


  same input making more output
• A good where demand increases as income increases

  Normal Good
• A good where demands increases due to a HUGE increase in income

  Luxury Good
• c+dp


  linear supply function
• Equilibrium


  supply=demand
• More demand than supply

  shortage/undersupply
• More supply than demand

  surplus, oversupply
• Increase in demand

  Demand curve shifts RIGHT
• Increase in demand (equilibrium)

  increase in price and quantity
• increase in supply (equilibrium)

  increase in quantity, decrease in price
• decrease in supply (eq)

  Decrease in quantity, increase in price
• decrease in demand (eq)

  Decrease in quantity, decrease in price
• Price of something compared to substitutes

  relative price
• change in relative price means

  change in resource allocation (more to that market)
• PED

  responsiveness of demand to changes in price
• PES

  responsiveness of supply to changes of price
• elastic

  highly responsive
• inelastic

  inresponsive
• unit elastic

  responsive
• SPLAT

  substitute, price (relative), luxury, addiction, time
• Pes Determinants

  Production time, cost of production, mobility of resources, durability, spare capacity