Supply and Demand Vocab Wrap-up

Fall 2010

Wrapping Up Vocab for this Unit

Diminishing Marginal Utility: The more you buy of something, the less satisfaction you get from it.Buy a car, get great satisfaction

(you do not buy many cars in your life)Buy a pencil, whoopie, big deal

1st Doughnut = YUMMM!!2nd Doughnut = Yumm3rd Doughnut = umm, yumm?4th Doughnut = I’m full5th Doughnut = ugg, no more

Normal Good: A good for which demand INCREASES as income rises.Computers, TVs,

Inferior Good: A good for which demand DECREASES as income rises.

Generic foods

Compliments: Goods that are consumed together.Peanut butter and JellyHammers and nails

Substitutes: Goods that are consumed as replacements for other goods.

Price of coffee goes up, I substitute tea, or apple juice

Price Ceiling: Artificial price beyond which a good may not increaseRent controls: NYC had a law

prohibiting rent over a certain price after WWII.

Price Floors: Artificial low price (usually set by the government) beyond which a good may not fall

Milk: Govt sets minimum price to keep dairy farmers from losing money.

Quotas: Setting limits or goals on production/ importation or sales Designed to allow increased competition by

limiting importsProtect ecosystems by limiting fishing or

hunting catchesEncourage production by setting high goals

(USSR under Stalin)