Economic Principles Flashcard

Front

During a holiday sale, the price of laptops dropped significantly, causing a rush of buyers to purchase more than usual. This situation illustrates the principle of the __________.

Back

Law of Demand

Front

Scenario: A farmer notices that when the price of tomatoes rises, he can sell more by planting additional fields. This aligns with the __________.

Back

Law of Supply

Front

At $5 per gallon, the amount of milk customers want to buy matches the amount dairy farms supply. This price is called the __________.

Back

Equilibrium Price

Front

When the price of luxury handbags increases, sales rise because buyers see the high price as a signal of exclusivity and status. These handbags are an example of __________.

Back

Veblen Goods

Front

Scenario: A new health tax increases the price of sugary drinks. Despite the higher cost, people continue buying the same amount because these drinks are considered a necessity. This is an example of __________ demand.

Back

Inelastic Demand

Front

Scenario: If rice becomes more expensive, a low-income family buys less of it and substitutes it with cheaper bread. This behavior demonstrates the __________.

Back

Substitution Effect

Front

A company finds that when they lower the price of a gym membership, the demand rises significantly. This indicates that gym memberships have high __________.

Back

Price Elasticity

Front

Scenario: A consumer feels wealthier because of a recent tax refund and decides to buy a more expensive brand of cereal instead of the generic brand. This illustrates the __________.

Back

Income Effect

Front

Scenario: A sudden drought limits the number of apples available. At the __________, apple prices rise, balancing the lower supply with reduced demand.

Back

Market-Clearing Price

Front

A type of bread becomes so cheap that, as incomes rise, people prefer to buy higher-quality bread instead. This bread is categorized as a __________.

Back

Giffen Good