An increase in consumer incomewill affect the supplyof any given
possibilities frontierassumes that the level of
technologyvaries when applying the
such as price
floors and ceilings, can actually reduce employment and raise market inefficiency.
The smaller percentage of one’s net budgetone has
to allocate money to a particular product, the
more price inelastic will be the demand for that
The law of demand states that there is a direct relationship between supply and
Equilibrium is a state of balance between supply and demand.
Joint output of individuals or nationswill be maximized when goods are exchanged between
parties in accordance with the law of “comparative
A supply curve is negatively sloped, while a demand curve is positively sloped. If given a graph of them both,
that will be evidenced by computing each curve’s X axis divided by its Y axiswhen devising a 90-degree angle.
Households play a dual roleof
providing the factors of production while purchasing the goods and services of
Excess demandin the market will cause the price
of a product to decline.
“As the price of gasoline rises, consumer demand decreases. In addition, the quantity demanded of compact cars increased, causing their price to rise.”
This statement contains TWO ERRORS:
demand and quantity demanded are confused twice.
A point inside the production
possibilities frontier represents an economy that is utilizing
“The big corporations in
this country, like ExxonMobil and GM, have deep pockets and need to be hiring
more people.” This is a positive statementabout economic policy.
The law of supply states that there is a negative relationship between price and quantity
A change in quantity demandedis a movement along the same demand
In the production possibilities frontier, a
nation’s boundary will shift inwardif
they export more than they import, likely leading to inflationary pressuresin the economy.
The “Law of diminishing
returns” states that as any activity is extended, it eventually
becomes increasingly easier to pursue the activity further.
Demand is measured on the vertical axisand supply on the horizontal axis.
A substitute goodis a determinant of supply.
and world trade proliferates, individual markets within countries’
economies become more competitive.
In the circular flow model, firms own
economic resources, and households buy the manufactured products and services.
Opportunity cost is the lowest valued benefit that must be
sacrificed as the result of choosing an alternative.
tend to have highly price inelastic
For economies that rely
decision making, the most important decisions are made by the
If the spot oil price in petroleum markets is rising, then we can
expect the supply curves of products
using petroleum as an input to shift rightward.
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