Economics Chapter 5 Study Guide

Quantity Supplied
Amount offered for sale at a given price

Change in supply
Different amounts offered for sale at each and every price in the market

Supply
Schedule of quantities offered for sale at all possible prices in a market

Subsidy
Government payment to encourage or protect a certain economic activity

Supply Elasticity
Responsiveness of quantity supplied to a change in price

Law of supply
Rule stating that more will be offered for sale at high prices than at lower prices.

Supply Schedule
Table listing showing the quantities produced or offered for sale at each and every possible price in the market

Supply Curve
Graphical representation of the quantities produced at each and every possible price in a market.

Market Supply curve
Supply curve that shows the quantities offered at various prices by all firms that sell the product in a given market.

Changes in quantity supplied
Change in amount offered for sale in response to a price change; movement along the supply curve.

Theory of Production
Theory dealing with the relationship between the factors of production and the output of goods and services

Short Run
Production period so short that only variable inputs can be changed

Long Run
Production period long enough to change amount of variable and fixed inputs used in production

Law of Variable Proportions
Rule stating that short-run output will change as one input is varied while others are held constant

Production Function
Graphic portrayal showing how a change in the amount of a single variable inputs affects total output.

Raw Materials
Unprocessed natural resources used in production

Total Product
Total output or production by a firm

Marginal Product
Extra output due to the addition of one more unit of input

Stages of Production
Phases of production – increasing, decreasing, and negative returns.

Diminishing returns
Stage of production where output increases at a decreasing rate as more units of variable input are added.

Fixed cost
Cost of production that does not change when output changes

Overhead
Board category of fixed costs that includes interest, rent, taxes, and executive salaries.

Variable cost
Production cost that varies as output changes; labor, energy, raw materials

Total cost
Variable plus fixed cost; all costs associated with production.

Marginal cost
Extra cost of producing one additional unit of production.

E-commerce
Electronic business or exchange conducted over the Internet.

Total revenue
Total receipts; price of goods sold times quantity sold.

Marginal revenue
Extra output due to the addition of one more unit of input.

Marginal analysis
Decision making that compares the extra cost of doing something to the extra benefits gained.

Break-even point
Production needed if the firm is to recover its costs; production level where total cost equals total revenue.

Profit-maximizing quantity of output
Level of production where marginal cost is equal to marginal revenue.