ECON: Unit 2: Ch 4 Flashcards Preview

Econ/AP Gov > ECON: Unit 2: Ch 4 > Flashcards

Flashcards in ECON: Unit 2: Ch 4 Deck (22):
0

Symbols

P, price
D, demand
S, supply
Delta, change
Y, income
QD, quantity demanded
QS, quantity supplied

1

Demand

Desire to purchase an item at a specific price, time, with the ability and willingness to pay
Microeconomic concept
Central to what/how/ for whom process
2 variables: price and quantity of a specific process at a given point in time

2

Quantity

One specific point stating how many units are demanded At a specific price

3

General demand

Serious of points stating how many units are demanded at various prices

4

Demand schedule

Quantity of demand varies with price
Collected data in a table

5

Demand curve

Line graph that shows amount of product that will be purchased at each price
Price on y axis, quantity demanded on x

6

Ceteris paribus

All other things being equal
Can only change one factor at a time to see what will happen to supply and demand
Studying short term affects

7

Law of demand

Quantity of demand varies inversely with its price
High demand, low price

8

Market demand

Shows quantities demanded by everyone who is interested in purchasing the product

9

Marginal utility

Extra usefulness or additional satisfaction a person gets from acquiring or using one more unit of a product

10

Diminishing marginal utility

Principle at states that the extra satisfaction we get from using additional quantities of a product begins to decline

11

Change in price...

Equal to change in quantity demanded

12

Income effect

Change in QD because of change in price that alters consumers real income

13

Substitution effect

Change in QD because of change in relative price of product

14

Change in demand factors

-results in entirely new demand curve
-consumer income, consumer taste(ads, season), substitutes price change, complements price change, expectations of price, number of consumers

15

Elasticity

The general measure of responsiveness, cause effect relationship
The extent to which a change in price causes a change in the quantity demanded

16

Elastic

Change in price causes a larger change in quantity demanded

17

Inelastic

Change In price is smaller than quantity demanded

18

Unit elastic

Change in price causes proportional Change in quantity demanded

19

Determinants of demand elasticity

Can the purchase be delayed? : can't, inelastic...can, elastic (luxury)
Are adequate substitutes available? : yes, elastic...no, inelastic
Does the purchase use a large portion of income? Yes, elastic...no, inelastic
Is it durable? Yes, elastic...no, inelastic

20

Coefficient method

Price elasticity = % change QD/%change in P
0-0.99999 inelastic
1 unit elastic
>1 elastic
Ignore negatives

21

Calculating percent changes

QDnew-QDold/QDold
Pricenew-price old/price old
%changeQD/%change price