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Microeconomics > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

How can market activity be explained?

A

by the basic goals of utility maximization, profit maximization and welfare maximization

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2
Q

how are our economic interactions necessitated?

A
  • Our absolute ability as individuals to produce all the things we need or desire
  • The limited amount of time, energy, and resources we have for producing those things we could make for ourselves
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3
Q

what are the two types of market?

A
  • factor market

- product market

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4
Q

any place where factors of production are bought and sold

A

factor market

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5
Q

any place where finished goods and services (products) are bought and sold

A

product market

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6
Q

what are some services that the government supplies?

A

education, national defense, highways and elementary schools

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7
Q

the most desired goods or services that are forgone in order to obtain something else

A

opportunity cost

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8
Q

refers to a place or situation where an economic situation occurs

A

market

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9
Q

the ability and willingness to sell (produce) specific quantities of a good

A

supply

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10
Q

the seller is on which side of the market?

A

supply

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11
Q

the ability and willingness to buy specific quantities of a good

A

demand

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12
Q

the buyer is on which side of the market

A

demand

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13
Q

a table showing the quantities of a good a consumer is willing and able to buy

A

demand schedule

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14
Q

a curve describing the quantities of a good a consumer is willing and able to buy

A

demand curve

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15
Q

the quantity of a good demanded in a given time period increases as its price falls

A

Law of Demand

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16
Q

What are the determinants of market demand?

A
  • Tastes (desire for this and other goods)
  • Income (of the consumer)
  • Other Goods (their availability and price)
  • Expectations (for income, price, tastes)
  • Number of buyers
17
Q

goods that substitute for each other; when the price of good x rises, the demand for good y increases

A

substitute goods

18
Q

goods frequently consumed in combination; when the price of good x rises, the demand for good y falls

A

complementary goods

19
Q

the assumption of nothing else changing

A

Ceteris Paribus

20
Q

what is the difference between a demand movement and a demand shift?

A
  • Movements along a curve can be a response to a price change
  • Shifts occur when determinants of the demand change
21
Q

what can cause a demand movement?

A

Changes in quantity demanded: movements along a given demand curve in response to price changes of that good

22
Q

what causes a demand shift?

A

Changes in demand: shifts of the demand curve due to changes in taste, income, other goods or expectations

23
Q

the total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands

A

market demand

24
Q

the total quantities of a good that sellers are willing and able to sell

A

market supply

25
Q

what are the determinants of market supply?

A
  • Technology
  • factor cost
  • taxes and subsidies
  • expectations
  • number of sellers
  • other goods
26
Q

the quantity of a good supplied in a given time period increases as its price increases

A

Law of Supply

27
Q

how can you determine the difference between movements and shifts of supply?

A
  • Changes in quantity supplied: movements along a given supply curve
  • Changes in supply: shifts of the supply curve
28
Q

what happens if ceteris paribus is violated?

A

the curve will shift

29
Q

the price at which the quantity of a good demanded equals the quantity supplied

A

Equilibrium

30
Q

Where does equilibrium occur?

A

at the intersection of the supply and demand curves

31
Q

the use of market prices and sales to signal desired outputs

A

market mechanism

32
Q

lower limit set for the price of a good (minimum price for services)

A

price floor

33
Q

the amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply

A

market surplus

34
Q

the amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand

A

market shortage

35
Q

an upper limit imposed on the price of a good

A

price ceiling

36
Q

what are three predictable effects of the price ceiling?

A
  • Increase the quantity demanded
  • Decrease the quantity supplied
  • Create a market shortage

Microeconomics (6 decks)

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