ECON ch 3- EXAM#1 Flashcards Preview

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Flashcards in ECON ch 3- EXAM#1 Deck (44):
1

in a perfect competitive market everyone is

a price taker

2

what type of market sells a homogenous good with many buyers and sellers, and with no market power

competitive market

3

the markets in which goods and services are exchanged

output markets (G&S markets)

4

the markets in which resources (labor, capital, land) are exchanged
-households
-entrepreneurships

input markets (factor markets)

5

the market in which households supply work for wages to firms that demand labor

labor market (input)

6

the market in which households supply their savings, for interest or for future profits, to firms that demand funds to buy capital goods

the financial- capital market (input)

7

households play 2 roles

1. consuming units (buyers) in the markets for outputs
2. supplying units in the market for inputs (labor)

8

organizations that transforms resources (inputs) into goods and services (outputs)

business firms

9

firms play 2 roles

1. consuming units in the market for inputs
2. supplying units in the market for outputs

10

demand shifters (5)

-income
-population (# of buyers)
-preferences
-prices of compliments/substitutes
-expectations

11

law of demand

the theory according to which the QD of a good falls when the P of a good rises

12

shifters are also known as

non-price determinants

13

"other things equal" =

= "ceteris paribus"

14

a table showing the relationship between the price and the QD of the analyzed goods (lattes)

demand schedule

15

are movements along the demand curve caused by a change in the price of the analyzed good.
changes in what

changes in the QD

16

a shift of the demand curve caused by changes in shifters (income, price of related goods, expectations)
changes in what

changes in demand

17

demand curve shifters
-shift to right

increases

18

demand curve shifters
-shift to the left

decreases

19

normal goods

are goods for which demand increases (right shift) when income goes up (and for which demand decreases when income goes down)

20

inferior goods

are goods for which demand decreases (left shift) when income goes up (and for which demand increases when income goes up)

21

demand for normal increases

income increases

22

demand for inferiors decreases

income increases

23

substitutes: when price increases, demand

demand increases

24

compliments: when price increases, demand

demand decreases

25

anything that causes a shift in tastes toward a good will increase demand for that good and shifts its demand curve to the right

preferences

26

affect consumers` buying decisions

expectations

27

price causes

price causes a movement along the same demand (only QD changes)

28

shifts the demand curve (5)

income, population, price of related GS, tastes, expectations

29

determinants of supply curve (5)

-price of the analyzed GS
-the cost of producing the good, which in turn, depends on price of inputs
-technology
-# of firms producing and selling the GS
-expectations

30

law of supply

the theory according to which the QS of a good increases when the price of the good rises

31

an increase in the # of sellers increases the QS at each price, shifts the supply curve to

to the right

32

the tendency in a free market for the price to change until the market clears (reaches equilibrium)

the market mechanism

33

QS=QD

equilibrium

34

two types of market disequilibria

1. excess demand (shortage)
2. excess supply (surplus)

35

when QS is greater than QD

surplus

36

when QD is greater than QS

shortage

37

a change in demand:
price goes up

demand increases
-quantity goes up
-price goes up

38

a change in supply:
technology improves

produce more, so P goes down and Q goes up

39

demand decreases

P and Q decreases (shift left)

40

supply increases

P decreases and Q increases (shift right)

41

demand increases

P and Q increases (shift right)

42

supply decreases

P increases and Q decreases (shift left)

43

demand decreases and supply increases

P decreases and Q either

44

demand increases and supply decreases

P increases and Q either