Some basic vocab for our intro to econ unit

1. Supply and Demand
Vocab Wrap-up
Fall 2010

2. 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 = Yumm
3rd Doughnut = umm, yumm?
4th Doughnut = I’m full
5th Doughnut = ugg, no more

3.  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

4.  Compliments: Goods that are consumed together.
 Peanut butter and Jelly
 Hammers and nails
 Substitutes: Goods that are consumed as replacements
for other goods.
 Price of coffee goes up, I substitute tea, or apple juice

5.  Price Ceiling: Artificial price beyond
which a good may not increase
 Rent 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.

6.  Quotas: Setting limits or goals on production/ importation
or sales
 Designed to allow increased competition by limiting
imports
 Protect ecosystems by limiting fishing or hunting
catches
 Encourage production by setting high goals (USSR
under Stalin)