Chapter 6: Equilibrium Review BINGO

Excise Tax A tax that is placed on items the government believes is “harmful” to people” Example: Cigarettes & alcohol

Decrease in Demand

Regulation Government intervention in the MARKET

Subsidy Example: The government helps students pay for their school lunches.

Operating Costs Cost of operating a facility

Output QUANTITY PRODUCED per (over) TIME

Demand The amount a person is willing and able to BUY

Supply The amount a firm is willing and able to SELL

Supply schedule PriceQuantity $11 $22 $33 $44 $55

Taxes One of the “T”s in Spent $.06 on a dollar or 1/3 of your gross income.

Complement “You look good” OR +

Increase in Quantity Demanded

Inverse Relationship Variable move in Opposite direction (explains law of demand)

Price Floor

Price Ceiling

PYNTE Price of related goods Y income Number of demanders Taste Expectations

Minimum Wage An example of a price floor. The smallest amount a person can get paid

Input Example: wood to make chairs Example: sauce for pizza

Supply Curve

Profit Total Revenue - Total costs

Necessity Something that you always need- no matter how much it costs

Supplier Input Costs Spent variable of “S”“S”

Normal Good As your income increases, you demand more of this kind of product Example: Lobster, BMW

Ceteris Paribus A Latin phrase meaning- “all other things held constant”- except for PRICE

Variable Cost A cost that changes

Total Cost Fixed Cost + Variable Cost

Number of Demanders Pynte variable of “N”

Luxury

Market Demand Schedule PriceQuantity $15000 $24000 $33000 $42000 $51000

Decrease in Supply

Spent Supplier Input Costs Price of related goods Expectations Number of suppliers T- 4 T’s (Tech, tampering, taxes, temp.)

Increase in Demand

Decrease in Quantity Demanded

Taste “BIG hair” “Flat hair” Out of style In style

Demand Curve

Decrease in Quantity Supplied

Substitute OR hamburgerHot dog

Increase in Quantity Supplied

Direct Relationship 2 variables move in the same direction

Price of Related Goods OR Another shirt Shirt pants substitutecomplement

Market Supply Schedule PriceQuantity $11000 $22000 $33000 $44000 $55000

Technology An improvement to a piece of machinery Example: A computer

Increase in Supply

Rent Control In New York, this is a common practice to eliminate rent prices getting to high for the “average” person to afford

Excess Demand Another name for a shortage

Equilibrium Price $2

Equilibrium Quantity 20

Disequilibrium Anything other then equilibrium

Excess Supply Another name for a surplus

Law of Demand As price increases, demand decreases. As price decreases, demand increases.

Number of Suppliers “N” in SPENT variables Amount of firms

Expectations SPENT & PYNTE variable “E” What will happen?

Law of Supply As price/output increases, supply increases or As price/output decreases, supply decreases

Inferior Good As income increases, people demand LESS of a product Example: SPAM

Tampering A “T” in the SPENT variables Means government regulations

Temperature A “T” in the SPENT variables weather

Demand Schedule PriceQuantity $15 $24 $33 $42 $51

Elastic Describes demand that is very sensitive to a change in price

Increasing Marginal Returns A level of production in which the marginal product of labor increases as the number of workers increases

Total Revenue Total amount a company brings in COST + PROFIT

Decreasing Marginal Returns A level of production in which the marginal product of labor decrease as the number of workers increases

Income PYNTE variable “I” or “Y” The amount a person or household makes

Fixed Cost A cost that does not change

Marginal Cost The cost of producing 1 more unit of a product

Inelastic Describes demand that is NOT sensitive to a change in price