Principles of Macroeconomics Chapter 3 – Flashcards
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Willingness to Pay
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The maximum amount of money a person is willing to pay for a good. AKA reservation price.
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Marginal Willingness to Pay
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The reservation price a consumer is willing to pay for each incremental unit of a good.
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Demand
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The quantity of a good a person is willing and able to purchase at any given price during a specified time period, all other factors held constant.
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Demand Schedule
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A table that shows the price of a good and the number of units a buyer is willing to purchase at that price during a specific period time period.
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Demand Curve
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A graphic representation of an individual's demand schedule. The demand curve plots all of the price-quantity combinations ash individual is willing to accept.
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Law of Demand
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The observation that when the price of a good rises (falls), the quantity demanded of it falls (rises). Changes in price and quantity demanded are inversely related.
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Shifts
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movements of the entire curve.
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Slides
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moving along a demand curve
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Normal Good
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A good that a person is willing to buy more of at each and every price as her income increases and less of as her income declines.
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Inferior Good
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A good and individual is willing to buy less of at each and every price as her income increases and more of as her income declines.
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Substitute Goods
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Goods that are related in such a way that an increase in the price of one increases demand for the other; conversely, a decrease in the price of one decreases demand for the other.
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Complementary Goods
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Goods that are usually used in conjunction with one another.
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Property Right
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The legal or social right to us a scarce resource in a particular way.
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Market
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A location-physical or virtual-where buyers ands sellers interact, directly or through representatives, to voluntarily exchange economic goods.
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Market Demand
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The total number of units of a good demanded at each and every price in a particular market. Market demand is the same of the individual quantities demanded at each and every price.
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Supply
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Quantity of goods or services offered for sale at a specific time or price.
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Supply Schedule
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A table that shows the price of a good and the number of units a producer is willing and able to supply a different prices during a specified period of time, all other factors held constant.
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Supply Curve
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A graphic representation of a supplier's supply schedule. The supply curve plots various price-quantity combinations an individual producer is willing to accept.
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Law of Supply
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When the price of a good increases, suppliers are willing to produce more units of the good, all else being the same. Conversely, when the price falls, suppliers cut back on the number of units they are willing to produce.
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Input Price
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The price paid for a unit of a resource used in the production of a good.
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Market Supply
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The total number of units of good supplied at each and every price in a particular market during a particular period of time. Market supply is the sum of the individual quantities supplied at each and every price.
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Equilibrium Price
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The price at which the quantity demanded in the market is exactly equal to the quantity supplied; the market-clearing price.
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Equilibrium Quantity
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The quantity bought and sold at the equilibrium price.
