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BEC > Microeconomics (M42) > Flashcards

Microeconomics (M42) Flashcards

1
Q

This is the quantity of a good or service that consumers are willing and able to purchase at a range of prices at a particular time

A

Demand

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2
Q

Graphically, a demand curve shows an ____ relationship between the price and quantity demanded

A

Inverse

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3
Q

____ products are demanded at higher prices

A

Fewer

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4
Q

This happens when demand variables other than price change

A

A demand curve shift

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5
Q

This measures the sensitivity of demand to a change in price

A

Price Elasticity of Demand

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6
Q

If the Elasticity of Demand is > 1 then…

A

Elastic (sensitive to price changes)

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7
Q

If the Elasticity of Demand is = 1 then…

A

Unitary

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8
Q

If the Elasticity of Demand is less than 1 then…

A

Inelastic (not sensitive to price changes)

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9
Q

As prices increase, and demand is > 1 (elastic), how will revenue be effected?

A

Decreased

If demand is very elastic, an increase in price will cause fewer purchases to be made - causing a decrease in revenue

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10
Q

As prices increase, and demand is less than 1 (inelastic), how will revenue be effected?

A

Increased

If demand is inelastic, an increase in price will not affect purchases made, causing an increase in revenue

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11
Q

As prices decrease, and demand is > 1 (elastic), how will revenue be effected?

A

Increased

If demand is elastic, a decrease in prices will cause more purchases to be made - causing an increase in revenue

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12
Q

As prices decrease, and demand is less than 1 (inelastic), how will revenue be effected?

A

Decreased

If demand is inelastic, a decrease in price will not affect purchases made, causing a decrease in revenue

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13
Q

This measures the change in the quantity demanded of a product given a change in income

A

Income Elasticity of Demand

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14
Q

If the income elasticity of demand is > 0 what does this mean for normal goods and inferior goods?

A

Normal goods will be purchased more and inferior goods will be purchased less as consumers have more income to purchase the ‘normal’ goods that they desire

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15
Q

If the income elasticity of demand is less than zero, what does this mean for normal goods and inferior goods?

A

Normal goods will be purchased less and inferior goods will be purchased more as consumers have less income to purchase the ‘normal’ goods that they desire

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16
Q

This measures the change in demand for a good when the price of a related or competing product is changed

A

Cross-Elasticity of Demand

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17
Q

If the Cross-Elasticity of Demand Coefficient is positive (> 0), what does this mean for the two products?

A

They are substitutes

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18
Q

If the Cross-Elasticity of Demand Coefficient is negative (less than 0), what does this mean for the two products?

A

They are complements (like PB&J)

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19
Q

If the Cross-Elasticity of Demand Coefficient is zero (= 0), what does this mean for the two products?

A

They are unrelated

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20
Q

If the income elasticity of demand coefficient for a particular product is 3.00, the good is likely …

A

a luxury good

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21
Q

This refers to the fact that as the price of a good falls, consumers will use it to replace similar goods

A

Substitution Effect

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22
Q

This refers to the fact that as the price of a good falls, consumers can purchase more with a given level of income

A

Income Effect

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23
Q

The more goods an individual consumes, the more total utility the individual receives. However; the marginal (additional) utility from consuming each additional unit decreases. What is this law?

A

Law of Diminishing Marginal Utility

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24
Q

The main deciding factor for consumption is…

A

Personal Disposable Income

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25
Q

This is the amount of income consumers have AFTER receiving transfer payments from the government (e.g., welfare) and paying their taxes

A

Personal Disposable Income

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26
Q

The Marginal Propensity to Consume (MPC) + the Marginal Propensity to Save (MPS) =

A

1

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27
Q

This is the percentage of additional income that is saved

A

Marginal Propensity to Save (MPS)

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28
Q

This is how much of each additional dollar in personal disposable income a consumer will spend

A

The Marginal Propensity to Consume (MPC)

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29
Q

The higher the price the ____ (more/less) products will be supplied

A

More

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30
Q

This occurs when the supply variables other than price change

A

Supply Shift Curve

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31
Q

This measures the percentage change in the quantity supplied of a product resulting from a change in the product price

A

Elasticity of Supply

32
Q

A product’s ____ is determined by demand and supply

A

Equilibrium

33
Q

This is the price at which all the goods offered for sale will be sold

A

Product Equilibrium

34
Q

This will cause good shortages

A

Price Ceiling

Because suppliers will devote their production facilities to producing other goods

35
Q

This will cause overproduction and surpluses

A

Price Floors

36
Q

This is a minimum specified price that may be charged for a good

A

Price Floor

37
Q

This is a maximum price that may be charged for a good

A

Price Ceiling

38
Q

This term is used to describe damage to common areas that is caused by the production of certain goods but is not included in the production costs of the goods

A

Externalities

39
Q

This is the fixed cost per unit of production - it goes down consistently as more units are produced

A

Average Fixed Costs (AFC)

40
Q

This is total variable costs divided by the number of units produced. It initially stays constant until the inefficiencies of producing in a fixed-size facility cause variable costs to begin to rise

A

Average Variable Costs (AVC)

41
Q

This is the added cost of producing one extra unit. It initially decreased but then begins to increase due to inefficiencies

A

Marginal Cost (MC)

42
Q

This is total costs divided by the number of units produced. Its behavior depends on the makeup of fixed and variable costs

A

Average Total Cost (ATC)

43
Q

This law states that as we try to produce more and more output with a fixed productive capacity, marginal productivity will decline

A

Law of Diminishing Returns

44
Q

When demand increases (decreases) but there is no change in supply, how will this effect equilibrium price?

A

Equilibrium price will also increase (decrease)

45
Q

Demand and Equilibrium price have a ____ (direct/inverse) relationship

A

Direct

46
Q

When demand increases (decreases) but there is no change in supply, how will this effect the quantity purchased?

A

Quantity Purchased will also increase (decrease)

47
Q

Demand and Quantity Purchased have a ______ (direct/inverse) relationship

A

Direct

48
Q

When supply increases (decreases) but there is no change in demand, how will this effect equilibrium price?

A

Equilibrium will decrease (increase)

49
Q

Supply and Equilibrium price have a ____ (direct/inverse) relationship

A

Inverse

50
Q

When supply increases (decreases) but there is no change in demand, how will this effect quantity purchased?

A

Quantity Purchased will also increase (decrease)

51
Q

Supply and Quantity Purchased have a ______ (direct/inverse) relationship

A

Direct

52
Q

If demand increases but supply decreases, how does that effect both equilibrium price and quantity purchased?

A

Equilibrium price increases, along with demand

Quantity Purchased is indeterminate

53
Q

If demand decreases but supply increases, how does that effect both equilibrium price and quantity purchased?

A

Equilibrium price decreases, along with demand

Quantity Purchased is indeterminate

54
Q

If both demand and supply increase (decrease), how does that effect both equilibrium price and quantity purchased?

A

Equilibrium price is indeterminate

Quantity purchased will increase (decrease) as it has a direct relationship with both demand and supply

55
Q

What are the three possible outcomes when a firm increases all production factors by a given proportion?

A

1) Constant return to scale (output increases in the same proportion)
2) Increasing returns to scale (output increases by a greater proportion)
3) Decreasing returns to scale (output increases by a smaller proportion)

56
Q

This is the amount of profit necessary to compensate the owners for their capital and/or managerial skills. It is just enough profit to keep the firm in business in the long run

A

Normal Profit

57
Q

This is the amount of profit in excess of normal profit. In a perfectly competitive market, this type of profit cannot be experienced in the long run

A

Economic Profit

58
Q

In microeconomics, the distinguishing characteristic of the long run on the supply side is that

A

All inputs are variable

59
Q

What market structure has a large number of sellers, each of which is too small to affect the price of the product or service

A

Perfect (Pure) Competition

60
Q

What market structure has only a single seller of a product or service for which there are no close substitutes

A

Pure Monopoly

61
Q

Which market structure has many firms selling a differentiated product or service

A

Monopolistic Competition

62
Q

What market is characterized by significant barriers to entry?

A

Oligopolies

63
Q

How do you calculate the Price Elasticity of Demand?

A

% Change in Quantity Demanded /

% Change in Price

64
Q

How do you calculate the Price Elasticity of Demand when asked to use the ARC Method?

A

[Change in Quantity Demand / Avg Quantity] /

[Change in Price / Avg Price]

65
Q

How do you calculate the Income Elasticity of Demand?

A

% Change in Quantity Demanded /

% Change in Income

66
Q

How do you calculate the Cross Elasticity of Demand? (the change in quantity demanded for X versus the change in price for Y)

A

% Change in Quantity Demanded of X /

% Change in Price of Y

67
Q

The consumption function is as follows:

C = C0 + C1Yd

What does C stand for?

A

Consumption for the period

68
Q

The consumption function is as follows:

C = C0 + C1Yd

What does Yd stand for?

A

Disposable Income for the period

69
Q

The consumption function is as follows:

C = C0 + C1Yd

What does C0 stand for?

A

The Constant

70
Q

The consumption function is as follows:

C = C0 + C1Yd

What does C1 stand for?

A

The slope of the consumption function which is also the MPC (Marginal Propensity to Consume)

71
Q

How do you calculate the elasticity of Supply?

A

% Change in Quantity Supplied /

% Change in Price

72
Q

The distinguishing characteristic of ______ markets is mutual interdependence of firm pricing and output decisions

A

Oligopolistic

73
Q

The distinguishing characteristic of ______ markets is a single seller of homogeneous product with no close substitutes

A

Monopolies

74
Q

The distinguishing characteristic of ______ markets is a single seller of heterogeneous product with no close substitutes

A

Monopolies

75
Q

The distinguishing characteristic of ______ markets is significant entry and exit barriers in the industry

A

Oligopolistic

Oligopolistic markets have significant barriers to entry

76
Q

Identify the formula for calculating a price index

A

[Price of market basket in a given year /
Price of same market basket in base year]
* 100

BEC (17 decks)

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