Economics: Supply and Demand – Flashcards

Has flows of goods, services, and payments between two groups, households and firms, through three markets: goods, labor, and financial capital. Goods market includes items households buy: food, clothes, furniture, haircuts, phone service, computers, and so on. Goods flow from firms to household, households pay for products produced by firms and money flows to firms. Labor market is where labor flows from households. Financial markets households invest money either directly into stocks or into a savings account, which in turn invests in or lends to firms

Adam Smith in The Wealth of Nations mentions. Diamonds are high in value but low in use. Water is low in value but high in use. Price= exchange value- tied to scarcity.

demand for a good-relationship between the price of a good and the quantity of that good that's demanded. price of a good goes up quantity demanded tends to drop. Line of demand is a downward slope. Quantity demanded refers to the specific amount of a good that is desired at each given price. Demand refers to the relationship between price and quantity demanded.

Supply refers to the relationship between the quantity of a good supplied and the price of the good, a curve.supply curve goes upward. Quantity supplied refers to the specific amount produced at a given price, its a point.

A good could be priced at equilibrium but some people can think that they are paying for too much for that good. Each person is different ""real people don't think the that way.""Many people search for the lowest possible price, taking their desires, their finances, and their possibilities for substitution into account. Reality of supply and demand may not always be likable.

Coca cola was trying to boost their profits and expand their global market and ended up boosting East Germany's market making it roughly equal to west Germany.

It shows how a communist economy works. There are no changes in price, no competition. Each cigar cost the same. Since each shopkeeper does not get payed on the number of cigars that they sell there must be an over production of cigars since the shopkeepers have no incentive to cell the cigars. They are not being allocated to the right buyers because the citizens in Cuba do not have as much money as people in the United States. Developing countries have to go through more work to just keep there family alive than buying luxuries.

similar concept of happiness, only broader

A good that we buy in increasing quantities as we grow richer- things like sports cars and French Wines.

It is not fair for people living comfortably to impose a preference on individuals in the developing world because people in developing worlds don't have clean water or homes, or birthday cakes. They don't have the money for health care and for food. They don't have the jobs like developed countries do. Citizens in a developing country is not going to worry about a forest or tigers because they are more worried about getting payed and having money to take care of themselves and their family.

No, In 1999 the New York Times published the obituary of Oseola McCarty, a women who died at the age of 91 after spending her life working as a laundress in Hattiesburg, Mississippi. She saved her money and eventually gave it away the a university for poor students than buying a big screen TV or a fancy apartment. Mr. Autrey shealied a man with his body protecting him from 5 train cars.

At the end of the day you feel better about what you do

The price to have children has risen greatly compared to 50 years ago. The clothing and food is not the reason for increase in price rather the primary cost of raising a child is the cost of the earnings forgone when the parent (normally mother) quits or cuts back on work to look after the child at home.

The market economy shows firms how many of a product they should produce and the type of resources they can use to create products that will gain an increase of demand.

Prices are always determined by supply and demand. But there are many things that can affect supply and demand

Sherwin Roster economist from University of Chicago 1.) A talent, skill, or ability that has few substitutes 2.) A demand for that ability 3.)Earnings that are based on relative performance, not absolute performance 4.) A Technology that allows a person to reach a large number of buyers

The basis of "Market Power" Control of a critical resource -debrees diamonds, professional athlete union Economies of Scale (Natural Monopolies) -Public utilities Legal Franchises -Postal service, local cable TV Patents and copyrights -pharmaceutical drugs, printed and recorded material Tariffs -Tax on imported goods Advertising -kleenex,chapstick,iPod, breakfast cereals Network Economies -Facebook, Microsoft windows, twitter

the value of some goods rises with the number of other people using them

Firms have some control over what they charge

it allows firms to gather more information about their customers

The markets rewards scarcity, which has no inherent relation to value

Airplane firms used quality to distinguish themselves. African gas stations have their employees dress in sharp uniforms with bow ties and have sparkly clean bathrooms.

Daniel Kahneman professor at Princeton won a Nobel Prize in Economics in 2002. bounded rationality which suggests that most of us make decisions using intuition or rules of thumb, kind of like looking at the sky to determine is it will rain, rather than spending hours poring over weather forecasts. Sometimes works fine sometimes doesn't. A motorcycle for sale and how dangerous a motorcycle is compared to flying in an airplane.

refers to the practice of charging different prices for the same good or service. 1st degree requires information about individual consumers. Selling each unit of output at the highest possible price. Live auction, EBay

large databases on individual behavior. Shopping history, browsing history, social media post, email content

markets and prices

any arrangements used by buyers and sellers to carry out voluntary, mutually beneficial exchange. Craigs list, woodmans, gas station, facebook, flee market, stock market, college...

Markets determine prices, which provide information about relative scarcity

Prices are determined by the interaction of: buyers, who demand goods and services sellers, who supply goods and services Both can have an influence What can sellers look for? What do sellers want?

Other things remaining the same, price and quantity demanded move in opposite directions.

Income effect, substitution effect*, simple cost benefit analysis

There are factors (beside price) that will affect the demand for a good: consumer's incomes, population (# of buyers), tastes, prices and availability of substitutes.

Other things remaining the same, price and quantity move in same direction. Why? a higher price causes existing firms to increase production new firms to enter the market.

There are other factors (besides price) that will affect the demand for a good: technology, weather, input prices

Definition: A state from which there is no tendency to change Condition: A market is in equilibrium when the quantity supplied of a good equals the quantity demanded