1. Microeconomic Challenges
Economics Unit 2 Review

2. Capital
One of the factors of production that can be defined as the equipment and factories needed to produce goods

3. Results in an increase in the quantity demanded of that product
Decrease in Price
Results in an increase in the quantity demanded of that product

4. Will usually cause producers to supply more and consumers to buy less
A High Price
Will usually cause producers to supply more and consumers to buy less

5. Scarcity
Influences the price of a product by causing inflation

6. Refers to the overall decrease in the price of goods and services
Deflation
Refers to the overall decrease in the price of goods and services

7. Refers to the overall increase in the price of goods and services
Inflation
Refers to the overall increase in the price of goods and services

8. The point at which supply and demand intersect on the graph
Equilibrium
The point at which supply and demand intersect on the graph

9. Market Economy
Prices are established by the interaction of supply and demand

10. Substitute Products
Competitive products which satisfy the same need as another, thus a decrease in the price for one will usually result in a decrease in demand for the other. (ex. Coca-Cola and Pepsi)

11. Complementary Products
Products which are used together. Hot Dogs and Hot Dog Buns are examples.

12. Law of Demand
When the price of a good rises, the amount demanded of that good falls and when the price of a good declines the amount demanded of that good increases

13. Demand
Measured by the consumer desire for a product as well as the willingness and ability to buy the product

14. Determinants of Demand
Income
Consumer Expectations
Population
Consumer Tastes
Complements and Substitutes

15. Increased Income
Demand determinant which usually increases demand in the marketplace. This means that the demand curve will shift to the right.

16. The quantity of a good supplied rises as the price rises
Law of Supply
The quantity of a good supplied rises as the price rises

17. The quantity which producers are willing to produce
Supply
The quantity which producers are willing to produce

18. Determinants of Supply
Changes in the cost of resources used to make the good
Change in the price of other goods these resources could make
Change in technology used to make the good
Change in producers’ price expectations
Change in number of sellers in the market

19. Shortage
Results when the price of a product falls below the equilibrium price since demand will exceed supply (based on the laws of supply and demand)
The quantity which results when demand exceeds or is in excess of supply at a given market price

20. Surplus
the excess quantity which results when supply exceeds demand at a given price

21. When a modest price increase or decrease has a large effect on demand
Elastic Demand
When a modest price increase or decrease has a large effect on demand

22. Inelastic Demand
When a modest price increase or decrease has little or no effect on demand

23. Production Possibilities Curve
Shows the different quantities that a small company would produce with their limited resources. Points along the curve represent the opportunity cost

24. Subsidy
A government payment to producers which will reduce production costs. Because of this producers would be willing to produce more items. This will cause a the supply curve to shift to the right.

25. Consumers are told that the consumption of cauliflower will significantly reduce the risk of cancer. Which scenario is likely to happen in the cauliflower market?

26. In the graph, what happened to the equilibrium price when the supply curve moved from S1 to S2?

27. In the graph, what might explain the movement of the demand curve from D1 to D3?