Unit 2 Markets

Law of Demand

• consumers buy more of a good when its price decreases and less when its price increases

• when consumers react to an increase in a good's price by consuming less of that good and more of other goods

• producers offer more of a good as its price increases and less as its price falls

• describes demand that is very sensitive to a change in price

When consumers react to an increase in a good's price by consuming less of that good and more of other goods

Normal Good

• a good that consumers demand LESS of when their incomes increase

• consumers buy more of a good when its price decreases and less when its price increases

• a good that consumers demand MORE of when their incomes increase

• describes demand that is very sensitive to a change in price

Inferior Good

• consumers buy more of a good when its price decreases and less when its price increases

• a good that consumers demand LESS of when their incomes increase

• total amount of money a firm receives by selling goods or services

• a good that consumers demand MORE of when their incomes increase

describes demand that is very sensitive to a change in price

revenue minus total cost

• Subsidy

• Revenue

• Profit

• Elastic

total amount of money a firm receives by selling goods or services

• Revenue

• Profit

• Law of Demand

• Law of Supply

Law of Supply

• when consumers react to an increase in a good's price by consuming less of that good and more of other goods

• producers offer more of a good as its price increases and less as its price falls

• consumers buy more of a good when its price decreases and less when its price increases

• a good that consumers demand more of when their incomes increase

A government payment that supports a business or market

A Surplus