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Econ > Chapters 7 - 12 chug > Flashcards

Chapters 7 - 12 chug Flashcards

1
Q

Demand

A

Willingness and ability to buy a product

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2
Q

Demand’s relation to price

A

As price increases demand decreases

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3
Q

Individual demand

A

Amount that a consumer is willing to buy at different prices

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4
Q

Market demand

A

Total demand for product at different prices

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5
Q

Aggregation

A

Totaling up of demand

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6
Q

Demand schedule

A

Displays different quantities demanded at different prices

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7
Q

Demand curve

A

Diagram displaying the change in quantity demanded over a change in price

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8
Q

Movements along a curve

A

Extension: quantity increases
Contraction: quantity decreases

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9
Q

Factors that cause a shift in demand

A

Change in income
Change in price of related products
Advertising campaigns
Population (age composition, size)
Trends

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10
Q

Normal good

A

A product that’s demand increases when income increase

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11
Q

Inferior good

A

A product that’s demand decreases when income increase

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12
Q

Substitute

A

A product that can replace another

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13
Q

Supply

A

Willingness and ability to buy a product

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14
Q

Supply’s relation to price

A

As price increases demand increases

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15
Q

Individual supply

A

Supply of one firm

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16
Q

Market supply

A

Total supply for a product in an industry

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17
Q

Supply schedule

A

Displays different quantities supplied at different prices

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18
Q

Supply curve

A

Diagram displaying the change in quantity supplied over a change in price

19
Q

Factors that cause a shift in supply

A

Costs of production
Technology
Taxes
Subsidies
Natural factors (Weather, health, livestock)
Prices of other products
Disasters and war
Discoveries and depletion of commodities

20
Q

Equilibrium price

A

Price where demand and supply are equal

21
Q

Disequilibrium

A

A state where demand and supply are not equal

22
Q

Surplus

A

Supply is greater than demand

23
Q

Shortage

A

Demand is greater than supply

24
Q

Cause of shift in a D&S diagram

A

Movement in the other market force and a change in price

25
Q

PED

A

Percentage change in demand over Percentage change in price
(How responsive demand is to a change in price)

26
Q

Calculating PED

A

((Change in demand/original quantity demanded) *100) / ((Change in price/original price) *100)

27
Q

Elastic

A

Quantity changes by a greater proportion when there is a change in price

28
Q

Inelastic

A

Quantity changes by a smaller proportion when there is a change in price

29
Q

Factors for elasticity of demand

A

Availability of substitutes
Loyalty
Addictiveness
Necessity
Proportion of income taken
Ease of switching
Time

30
Q

Perfectly elastic demand

A

When a change in price causes a complete change in quantity demanded

31
Q

Perfectly inelastic demand

A

When quantity demanded does not change due to a change in price

32
Q

Unit elasticity of demand

A

When a percentage change in price results in an equal percentage change in quantity demanded giving a PED of 1

33
Q

Increase in price when inelastic

A

Increased revenue

34
Q

Increase in price when elastic

A

Loss revenue

35
Q

Changes in PED

A

PED becomes more elastic as price increases
A shift to the right causes more inelastic curve vice versa

36
Q

PES

A

Percentage change in quantity supplied over a percentage change in price

37
Q

Calculating PES

A

((Change in supplied/original quantity supplied) *100) / ((Change in price/original price) *100)

38
Q

Factors of elasticity in supply

A

Time to produce
Cost of altering its supply
Storage capability

39
Q

Perfectly inelastic supply

A

When quantity supplied does not change to a change in price

40
Q

Perfectly elastic supply

A

A change in price causes an infinite change in supply

41
Q

Unit PES

A

When the percentage change in price is equal to the change in supply

42
Q

Changes in PES

A

Over time becomes more elastic
Advances in technology makes product more elastic

43
Q

Implications of PED and PES

A

Consumers benefit form elastic PED (Producers won’t drop prices due to lost revenue) and elastic PES (No large increase in price after demand increases)
Producers benefit from inelastic PED (higher prices and profit) and elastic PES (higher profits)
Governments want elastic PED (can discourage demerit goods by raising price of them ) and elastic PES (can subsidies the production of merit goods)

Econ (9 decks)

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