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ECON 101 > Chapters 3 and 4 > Flashcards

Chapters 3 and 4 Flashcards

1
Q

Changes in a commodity price correspond to movements along the demand curve which are referred to as changes in __________

A

quantity demanded

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2
Q

What is the only variable that causes a change in quantity demanded

A

Price

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3
Q

What are the 6 variables that influence demand?

A
  1. Price of substitutes
  2. Price of Compliment
  3. Number of buyers
  4. Preference (Tastes)
  5. Excpectations
  6. Income
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4
Q

Price of substitues

A

two goods are substitutes if they satisfy the same needs. If the price of a substitute for good A increases, the demand for good A increases.

Corresponds to the demand curve shifting out which is an increase in demand

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5
Q

Price of complement

A

Two goods are compliments if they are consumed together (ie: cereal and milk). If the price of a complement of good A increases, the demand for good A decreases.

What are the 6 variables that influence demand?

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6
Q

Number of buyers

A

As the number of buyers increases, demand increases

What are the 6 variables that influence demand?

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7
Q

Excpectations

A

Consumers perceptions of future market conditions influence todays demand

What are the 6 variables that influence demand?

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8
Q

Income

A

normals good —> as income increases, demand increases

inferior goods —–> as income increases, demand decreases

What are the 6 variables that influence demand?

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9
Q

Supply

A

Supply function shows quantity of good supplied at different prices given the technology, the prices of input, and other relevant variables.

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10
Q

Quantity Supplied

A

ammount producers are willing to sell during a given time period

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11
Q

Law of supply

A

As the quantity of price of a commodity increases, the quantity supplied increases

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12
Q

Changes in Commodity

A

price corresponds to movements along the supply curve which are reffered to as changes in quantity supplied.

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13
Q

Variables Affecting Supply

A

-Cost of Inputs
-Technology and Productivity
-Number of Firms
-Taxes of subsidies
-Excpectations
-Prices of Substitues in Production
-Prices of Complements in Production
-Changes in Nature

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14
Q

Cost of Inputs

A

wages interest rates, opportunity costs, etc. As costs increases, the supply curve for the commodity shifts in, which corresponds to a decrease in supply.

Variables Affecting Supply

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15
Q

Technology and Productivity

A

A better, cheaper production technology allows the producer to supply more of the product at every prive level, thus increasing supply

Variables Affecting Supply

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16
Q

Number of Firms

A

If the number of firms increases, supply increases

Variables Affecting Supply

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17
Q

Taxes of subsidies

A

Taxes are an addition to production costs, and result in decreased supply

Variables Affecting Supply

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18
Q

Excpectations

A

The producers view of the future may change the current supply

Variables Affecting Supply

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19
Q

Prices of Substitutes in Production

A

Substitute in production are goods that can be produced using the same inputs (or input). If the price of a substitute in production for good X increases, the supply of good X decreases.

Variables Affecting Supply

20
Q

Prices of Complements in Production

A

Complements in production are called joint products. They are products, which by nature of production, are produced together when a price of a complement in production for good X increases, the supply of good X increases.

Variables Affecting Supply

21
Q

Changes in Nature

A

Natural events impact the supply of a product

Variables Affecting Supply

22
Q

Equillibrium

A

When supply curve meets demand curve

Quantity Supplied = Quantity Demanded

23
Q

Quantity demand is less than quantity supplied

A

surplus, decrease in price

24
Q

Quantity Demanded is more than Quantity Supplied

A

shortage, upward pressure on price

25
Q

Demand vs Quantity Demanded

A

Demand is the whole curve
Quantity demanded is a specific point on the demand curve

26
Q

shifts to the right

A

increase

27
Q

Supply vs Quantity supplied

A

Supply is the entire curve

Quantity supplied is how much firms supply at every price

28
Q

Demand and Supply curve slopes

A

Demand is negatively sloped
Supply is positively sloped

29
Q

shif to the left

A

decrease

30
Q

Supply factors shfit

A

Technology improves, shift right
excpected rise, sift left
more firms, shift right
Complements increase, shifft right
Subsittues Increase, shift left

31
Q

how is demand proportional with normal goods, and inferior goods?

A

shifts right for normal goods
shifts left for inferior goods

32
Q

Equillibrum Quantity

A

Quantity at Equillibrum

33
Q

Equillibrium Price

A

Price at Equillibrium

34
Q

Supply and Demand with government intervention

A

-Economic forces ration commodities and services through changing prices. The market works like an invisible hand, guiding economic forces to coordinate individual actions and allocate scarce resources.

-all individuals acting only in their self interest are guided by the invisible hand of the market to produces allocations that are best for society.

35
Q

Why is it when we look at the real world we do not see the economic forces working as smoothly as in theory?

A

-Information problems
-there are other forces operating in society
-political and legal forces
-sometimes markets fail

36
Q

information problems

A

consumers are producers do not possess perfect information

37
Q

there are other factors operating in society:

A

social and historical forces, the invisible handshake.

-social and historical forces can prevent a market from operating

38
Q

political and legal forces

A

“the invisible foot”, government and legal forces also guide and limit market activities

39
Q

sometimes market fail

A

invisible elbow

40
Q

If economic forces work so well, why do we need government?

A
  1. Ensure that activities and markets conform to social, cultural, legal and political norms.

2.To correct markets that fail

41
Q

Two regulations on price

A

-Price ceilings
-Price floors

42
Q

Effect on Equilibrium Price: Demand

A

shift left, decrease equillibrum price, shift right increases equilibrium price

43
Q

Effect on Equilibrium Price: Supply

A

Shift left increases price, shift right decreases price

44
Q

Effect on Equilibrium Quantity: Demand

A

Shift left decreases quantity
Shift right increase quantity

45
Q

Effect on Equilibrium Quantity: Supply

A

Shift right increases quantity, shift left decreases quantity

46
Q

How will price and quantity change if demand shifts left and supply shifts right?

A

Price will decrease, quantity we’ll be uncertain

47
Q

What will you have when supply and demand shift at the same time, either same or opposite directions

A

One variable from price and quantity will be certain one will be uncertain

ECON 101 (9 decks)

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