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Economics 202 > ECON Exam 1 Ch. 10, 3, 4, 5 > Flashcards

ECON Exam 1 Ch. 10, 3, 4, 5 Flashcards

(51 cards)

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1
Q

Demand

A

relationship showing the various quantities that buyers are willing and able to purchase at different possible prices during some period when all else is constant

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2
Q

3 ways to express demand

A

table
graph
equation

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3
Q

demand equation

A

30-5P

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4
Q

Law of Demand

A

price and quantity demanded are inversely related. As price rises, the quantity demanded of the product will decrease

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5
Q

Explanations for the Law of Demand

A

common sense
substitution effect & income effect
maximize utility

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6
Q

Substitution Effect

A

willingness to buy is effected. The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes.

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7
Q

Income effect

A

ability to buy is altered. The change in quantity demanded of a good that results from the effect of a change int he goods price on consumer purchasing power

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8
Q

Ceteris Paribus Condition

A

“all else equal” The requirement that when analyzing a relationship between two variables such as price and quantity demanded, all else must be held constant

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9
Q

Change in quantity demanded

A

movement along the same demand curve. Can only be caused by a change in that products own price

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10
Q

Change in demand

A

shift in the entire demand curve left(decrease) or right(increase) caused by some factor other than that products own price

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11
Q

Things that cause demand to shift

A 
income
prices of related goods
consumer taste or preferences
population
expectations of consumers
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12
Q

Income

A

two types of goods: normal and inferior
normal-a good which demand increases as income rises.
inferior-a good which demand increases as income falls

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13
Q

Price of Related Goods

A

substitutes-price of one good increases, demand for the other will increase
complementary-price of a complement decreases, demand for the other will increase

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14
Q

Consumer taste or preferences

A

taste increases, demand for that product will increase

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15
Q

Population

A

As population increases, the demand for most products will increase

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16
Q

Expectations of consumers

A

if consumers expect the future price of a good to decrease, then demand now for that product will decrease.

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17
Q

3 ways to express Supply

A

Table(schedule)
Graph(curve)
equation

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18
Q

supply equation

A

=+5P

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19
Q

Law of Supply

A

There is a positive relationship between price and quantity supplied. Price increases quantity supplied increases too

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20
Q

Change in Quantity Supplied

A

movement along the same supply curve caused by a change in that products own price

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21
Q

Change in Supply

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A

shift in the entire supply curve left(decrease) or right(increase), caused by some factor other than that products own price

22
Q

Things that cause a change in supply

Study These Flashcards
A 
input prices
technology
govt taxes, subsides, regulations
prices of substitutes in production
# of sellers
expectations held by sellers
23
Q

input prices

Study These Flashcards
A

if the price of a good used to make a good rises, then the number of goods a seller is able to make decreases so supply will decrease. also wages paid by sellers to their employees

24
Q

Technology

Study These Flashcards
A

Productivity
a positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs

25
Prices of substitutes in production
alternative products a firm could produce. if price of a substitute in a firm rises, that firm will focus on producing more of that substitute and then there will be less of the other good that are now being sold at a lower price and supply will shift left
26
Number of sellers
when new firms enter the market, the supply curve will shift to the right. when existing firms leave the market, the supply curve will shift to the left
27
Expectations held by sellers
if a firm expects the price of its good will be higher in the future than it is today, it has an incentive to decrease supply now and increase it in the future
28
Market equilibrium
where the quantity demanded = quantity supplied
29
surplus
where the quantity supplied is greater than the quantity demanded
30
shortage
quantity demanded is greater than the quantity supplied
31
Utility
the enjoyment or satisfaction people receive from consuming goods and services
32
Util
pretend unit of satisfaction
33
Marginal Utility
the change in total utility a person receives from consuming one additional unit of a good or service. =change in TU/change in Q
34
Law of Diminishing Marginal Utility
consumers experience diminishing additional satisfaction as they consume more of a good or service during a given period of time
35
Budget Constraint
the limited amount of income available to consumers to spend on goods and services
36
Utility Maximizing Rule
equal bang for your buck | MU1/P1=MU2/P2
37
Derivation of the Law of Demand
MU1/P1=MU2/P2, then let P1 fall and we now have MU1/P1>MU2/P2 so you will buy more of good 1
38
Consumer Surplus
The difference between what a consumer is willing to pay and what is actually being paid.
39
CS on a graph
area under the demand curve and above the price line
40
Marginal benefit
the additional benefit to a consumer from consuming one more unit of a good or service
41
Producer surplus
the difference between what a seller receives and what they were willing to accept
42
PS on a graph
area above the supply curve and below the price line
43
Marginal cost
the additional cost of to a firm of producing one more unit of a good or service
44
summation of marginal costs
area under the supply curve
45
Economic Surplus
the sum of consumer surplus and producer surplus
46
Deadweight Loss (DWL)
the reduction in economic surplus resulting from a market not being in competitive equilibrium
47
Price floor
a legal minimum below which the market is not permitted | Agricultural and Minimum Wage
48
Price ceiling
a legal max above which the market is not permitted | Rent Controls
49
Economic impact of Taxes
each tax must have a base and rate
50
base
general-hits almost everything | selective-gas, cigs, booze
51
rate
ad valorem-at value | specific-per unit

Economics 202 (2 decks)

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