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Economics 271 > Chapters 5, 13, 14 > Flashcards

Chapters 5, 13, 14 Flashcards

1
Q

Price elasticity of demand measures what?

A

Consumer Responsiveness

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2
Q

If consumers are responsive, what does this say about the elasticity?

A

Relatively Elastic

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3
Q

If consumers are unresponsive, what does this say about the elasticity?

A

Relatively Inelastic

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4
Q

Ed >1

A

Elastic demand

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5
Q

Ed<1

A

Inelastic demand

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6
Q

Ed=1

A

Unit elasticity

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7
Q

Ed=infinity

A

Perfectly Elastic Demand (horizontal line)

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8
Q

Ed=0

A

Perfectly Inelastic Demand (vertical line)

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9
Q

What does Price Elasticity of Demand Equal to 2 Mean?

A

The percentage change in quantity demand will be 2 times any percentage change in price.

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10
Q

Substitutability

A

The larger number of substitute goods that are available, the higher elasticity.

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11
Q

Proportion of Income

A

The higher the price of a product relative to one’s income, the higher the elasticity.

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12
Q

Luxuries vs. Necessities

A

The more a good is considered a “luxury” rather than a “necessity”, the higher the elasticity.

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13
Q

Time

A

The longer the time period under consideration, the higher the elasticity.

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14
Q

What does the Total Revenue Test do?

A

Observes what happens to total revenue when price changes. TR=PxQ

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15
Q

What happens if price and total revenue change in opposite directions?

A

Demand is elastic

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16
Q

What happens if price and total revenue change in the same direction?

A

Demand is inelastic

17
Q

What happens if price and total revenue are unchanged?

A

demand is unit elastic

18
Q

A decrease in price will increase total revenue in what situation?

A

Elastic Demand

19
Q

A decrease in price will decrease total revenue in what situation?

A

Inelastic Demand

20
Q

The measure of the responsiveness of the quantity of a product demand by consumers to changes in consumer income?

A

Income Elasticity

21
Q

Price Elasticity of Supply: Gold

A

Inelastic–Can’t just make more

22
Q

A measure of the responsiveness of the demand for a good to a change in the price of a substitute or complement when other things remain the same?

A

Cross elasticity.

23
Q

Measurements of satisfaction?

A

Utils

24
Q

What is utility?

A

Benefits and satisfaction

25
Q

Diminishing Marginal Utility?

A

The general tendency for marginal utility to decrease as the quantity of a good consumed increase.

26
Q

What do budget lines show?

A

Various combinations of two products which can be purchased with a given money income.

27
Q

A decrease in the budget shifts the budget line how?

A

leftward

28
Q

An increase in the budget shifts the budget line how?

A

rightward

29
Q

The total benefit that a person gets from the consumption of a good or service?

A

Total utility

30
Q

The total utility generally what as the quantity consumed of a good increase?

A

Increases

31
Q

The change in total utility that results from one-unit increase in the quantity of a good consumed? The extra benefit received

A

Marginal utility

32
Q

To maximize satisfaction the consumer’s money income should be allocated so that the last dollar spent on each product purchased yields the same amount of extra, marginal utility?

A

Utility maximizing rule

33
Q

Marginal utility will decline as the consumer acquires additional units or a specific product?

A

Law of diminishing marginal utility

34
Q

You would have to pay me $50 to attend that pro wrestling. What is the marginal utility?

A

Negative

35
Q

What is an Economy of Scale?

A

Features of a firm’s technology that make average total cost fall as output increase

36
Q

This (these) are the main source(s) of economies of scale, ceteris paribus?

A

specialization of labor and capital

37
Q

What is a money payment made for resources not owned by the firm itself?

A

Explicit cost

38
Q

If a good is narrowly defined, the good is considered this?

A

Elastic

39
Q

What is the difference between a budget line and an indifference curve?

A

Budget line measures possibility and indifference measures the willingness

Economics 271 (1 decks)

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