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2-11. BA 21C - Basic Microeconomics > Chapter 2: The Market Forces of Demand > Flashcards

Chapter 2: The Market Forces of Demand Flashcards

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1
Q

an organization that transforms resources (inputs) into products (output).

A

Firm

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2
Q

the primary producing units in a market economy.

A

Firm

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3
Q

a person who organizes, manages, and assumes the risks of a firm, taking a new idea or a new product and turning it into a successful business.

A

Entrepreneur

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4
Q

The consuming units in an economy

A

Households

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5
Q

The 3 basic decision - making units

A
  1. Firm
  2. Entrepreneur
  3. Households
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6
Q

are the markets in which goods and services are exchanged

A

Output or Product markets

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7
Q

The 3 input markets

A
  1. Labor Market
  2. Capital Market
  3. Land Market
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7
Q

are the markets in which resources—land, labor, and capital used to produce products are exchanged.

A

Input markets

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8
Q

Household supply work for wages to firms that demand labor

A

Labor Market

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9
Q

Households supply land or other real property in exchange for rent.

A

Land Market

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10
Q

households supply their savings, for interest or for claims to future profits to firms that demand funds to buy capital goods.

A

Capital Market

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11
Q

Is a group of buyers and sellers of a particular product

A

Market

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12
Q

Is one with many buyers and sellers, each has a negligilbe effect on price.

A

Competitive market

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13
Q

Formula of Getting Price elasticity of Demand

A

Ped = %^QD / %^P

Ped = Qd2 - Qd1 / Q1
———————-
P2 - P1 / P1

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14
Q

Buyers and sellers so numerous that no one can affect market price

A

Price taker

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15
Q

states that there is a negative or inverse relationship between price of the good itself and the quantity of the good emanded.

A

Law of Demand

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15
Q

The claim that the quantity demanded of a good falls when the price of the good rises, other things equal.

A

Law of Demand

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16
Q

IS the amount of the good that buyers are willing and able to purchase.

A

Quantity demanded

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17
Q

Is the willingness and the ability of buyers to purchase goods and services

A

Demand

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18
Q

a table that shows the relationship between the price of a good and the quantity demanded

A

Demand Schedule

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19
Q

Is a graph that illusstrating how much of a given product a household would be willing to buy at different prices

A

Demand Curve

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20
Q

Are goods for which demand goes up when income is higher and for which demand goes down when income is lower.

A

Normal Goods

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20
Q

The 7 factors affecting Demand Curve

A
  1. # of Buyers
  2. Income
    3.Price of related Goods
  3. Tastes
  4. Expectations
  5. Quality
  6. Advertisement
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21
Q

are goods for which demand falls when income rises

A

Inferior goods

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22
Is the sum of all household's wages, salaries, profits, interest payments, rents, and other forms of earnings in a given period of time.
Income
23
True or False If income will increase, demand for some goods will decrease but not the demand for all goods
False (If income will increase, demand for some goods will increase but not the demand for all goods)
24
True or False Increase in # of buyers, increases quantity demanded at each price. Shifts D curve to the right.
True
25
True or False Decrease in # of buyers, shifts D curve to the right.
False (Decrease in # of buyers, shifts D curve to the left.)
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are goods for which demand goes up when income is higher and for which demand goes down when income is lower.
Normal Goods
27
are goods for which demand falls when income rises.
Inferior Goods
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Demand for a _________ is positively related to income. Increase in income causes increase in quantity demanded at each price, shifts D curve to the ______.
Normal Goods; right
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Demand for an ________ is negatively related to income. An increase in income shifts D curves for inferior goods to the _______.
inferior good; left
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are goods that can serve as replacements for one another; when the price of one increases, demand for the other goes up.
Substitute goods
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are identical products.
Perfect substitutes
29
are goods that “go together”; a decrease in the price of one results in an increase in demand for the other, and vice versa.
Complement
30
Two goods are ________ if an increase in the price of one causes an increase in demand for the other
substitutes
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Two goods are _________ if an increase in the price of one causes a fall in demand for the other.
complements
32
A movement along the demand curve caused by a change in the price of the good itself.
CHANGE IN QUANTITY DEMANDED
33
A shift in the demand curve caused by a change in the factors/variables affecting demand
CHANGE IN DEMAND
34
4 basic types of elasticity:
¢Price elasticity of demand ¢Price elasticity of supply ¢Income elasticity of demand ¢Cross Price elasticity of demand
35
is a measure of how much the quantity demanded of a good responds to a change in the price of that good
price elasticity of demand
36
is always measured in percentage terms.
Elasticity
36
is the percentage change in quantity demanded due to a percentage change in the price.
Price elasticity of demand
36
Kinds of demand elasticity
1. Elastic demand 2. Inelastic demand 3. Unit Elastic demand or Unitary demand
36
states that when the price of a good rises, and everything else remains the same, the quantity of the good demanded will fall.
law of demand
37
Quantity demanded responds strongly to changes in price. A. Elastic demand B.. Inelastic demand C. Unit Elastic demand or Unitary demand
A.
38
Demand is _______ if the percentage change in quantity demanded is equal to the percentage in price A. Elastic demand B.. Inelastic demand C. Unit Elastic demand or Unitary demand
C.
39
Demand is if the percentage change in quantity demanded is less than the percentage change in price A. Elastic demand B.. Inelastic demand C. Unit Elastic demand or Unitary demand
B.
40
Demand is _______ if the percentage change in quantity demanded is greater than the percentage change in price A. Elastic demand B.. Inelastic demand C. Unit Elastic demand or Unitary demand
A.
41
Increasing price would reduce TR
Elastic
41
is the amount paid by buyers and received by sellers of a good.
Total Revenue
42
Increasing price would increase TR
Inelastic
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Reducing price would increase TR
Elastic
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The responsiveness of demand of one good to changes in the price of a related good – either a substitute or a complement
Cross Price Elasticity of Demand
44
Reducing price would reduce TR
Inelastic
45
Cross Elasticity will have negative sign (inverse relationship between the two)
Goods which are compliments
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Cross Elasticity will have a positive sign (positive relationship between the two)
Goods which are substitutes
46
shows the connections between firms and households in input and output markets
circular flow of economic activity
47
The good is considered a luxury good
Elastic
48
The good has many substitutes
Elastic
49
If lesser proportion of income is spent on the good
Inelastic
50
The good has no substitute
Inelastic
51
If a greater proportion of income is spent on the good
ElasticI
52
If a good is considered a necessity
Inelastic
53
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2-11. BA 21C - Basic Microeconomics (4 decks)

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