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🎶📒MicroEconomics > 2. Microeconomics 2 > Flashcards

2. Microeconomics 2 Flashcards

(50 cards)

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1
Q

Competitive demand

A

2 substitute goods

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2
Q

Complements

A

2 goods bought and consumed together
increase in the price of one good decreases demand for the other
(Negative XED)

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3
Q

Composite demand

A

Good is demanded for 2 or more distinct uses

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4
Q

Consumer surplus

A

Difference between market price and maximum a consumer would have been willing to pay

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5
Q

Contraction of demand

A

Movement along demand curve
Increase in price Leads to a reduction in quantity demanded

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6
Q

Contraction of supply

A

Movement along the supply curve
Fall in price reduces quantity supplied

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7
Q

Cross price elasticity of demand

A

Measure of responsiveness of quantity demanded for one good to a change in price of another good

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8
Q

Demand

A

The Quantity of a good or service people are willing to buy at a given price at a given time period

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9
Q

Demand curve

A

A graphical representation of the relationship between price and quantity demanded
Downward sloping- due to the law of demand.

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10
Q

Demand is price elastic

A

Quantity demanded changes more than proportionately to a change in price

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11
Q

Demand is price inelastic

A

Quantity demanded changes less than proportionately to a change in price.

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12
Q

Diminishing marginal utility

A

The consumption of an additional unit of a good yields less utility than the consumption of the previous unit.

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13
Q

Derived demand

A

Good is in demand as a result of demand for something else
Usually because the first good can be used to produce the second.

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14
Q

Effective demand

A

Willingness to buy backed by ability to pay

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15
Q

Elasticity

A

Responsiveness of one variable to a change in price of another

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16
Q

Excess demand

A

Quantity demanded exceeds quantity supplied, indicating the current price is below the equilibrium.

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17
Q

Excess supply

A

The quantity supplied exceeds quantity demanded, indicating the current price is above the equilibrium price.

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18
Q

Extension of demand:

A

A movement along the demand curve whereby a decrease in price leads to an increase in quantity demanded.

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19
Q

Extension of supply:

A

A movement along the supply curve where an increase in price leads to an increase in quantity supplied.

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20
Q

YED: Income elasticity of demand

A

A measure of responsiveness of quantity demanded for a good to a change in income

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21
Q

Inferior good

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A

A good where demand decreases as income rises

YED negative

22
Q

Joint demand

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A

The Relationship between 2 goods that are complements

23
Q

Joint supply

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A

Increase in supply of one good leads to an increase in the supply of another

24
Q

Law of demand

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A

An increase in price will lead to a fall in quantity demanded
(Ceteris paribus)

25
Law of supply
An increase in price will lead to an increase in quantity supplied
26
Luxury good
YED >1 Normal good, demand is income elastic
27
Market forces
Interacting supply and demand
28
Market clearing price
Neither excess supply or demand Nobody who wishes to buy or sell who cannot
29
Market equilibrium
Situation where Demand & supply are equal
30
Normal good
Demand increases as income increases Positive YED
31
PED
Responsiveness of quantity demanded to a change in price
32
PES
responsiveness of quantity supplied to a change in price
33
Producer surplus
Difference between the market price and the minimum a seller would have been willing to sell at
34
Substitute
A good that can be used for the same purpose as another (2 goods in competitive demand) Increase in the price of one good, increases quantity demanded of another. Positive XED
35
Supply
The Amount of a good or service that sellers are willing and able to sell at a given price
36
Supply curve
A graphical representation of the relationship between price and quantity supplied, upward sloping due to the law of supply.
37
The law of demand
Inverse relationship between price and quantity demanded As price rises, fewer people are willing and able to buy the good The costs will exceed the benefits from consumption
38
The demand curve is also downward sloping due to
Diminishing marginal utility The first unit of a good consumed provides the most utility, decreases with each subsequent unit consumed
39
Contraction & extension of demand
Contraction: increase in price causes QD to be lower Extension: decrease in price causes QD to be higher
40
Supply is upward sloping:
LAW OF SUPPLY- Positive correlation between price and quantity supplied the 2 are directly proportionate As price rises, Quantity supplied increases. Sellers have more of an incentive to sell
41
A change in price causes a movement along the supply curve : Extension and contraction of supply
Extension of supply- increase in price higher QS Contraction of supply- A reduction in price will cause the quantity supplied to be lower
42
Supply and demand cross = market equilibrium/ market clearing price
Quantity supplied= quantity demanded No one who wants to sell but is unable to. Neither excess supply or demand. A competitive market will move from one equilibrium to another.
43
Market forces: allocate resources in the free market
Price and output are determined by changes in supply and demand
44
Factors affecting demand:
Income Price of other goods Tastes and preferences Expectations of the future
45
Change in factors other than price will shift
Less of an incentive to buy= demand curve shifts left and down- at any given quantity the buyers will be willing to pay less.
46
Income increase:
Consumers have more spending power More people would be willing and able to pay.
47
second hand car market shift left
Demand curve for used cars shifts left at the price p1 quantity demanded falls. As a result, there is excess supply and sellers will cut price from P1 to P2 to establish a new market equilibrium at Q2
48
Price of other goods
Substitutes or complements:
49
Tastes and preferences
Affects the buyer’s valuation of the food itself
50
Factors affecting supply:
Cost of production Subsidy Tax Price of other goods Technology Productivity Government legislation Expectations of future events Firms entering or exiting the industry Weather/ natural disaster (particularly in agriculture)

🎶📒MicroEconomics (7 decks)

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