Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

BEC Cost Accounting Roger > Economic Concepts Demand & Supply > Flashcards

Economic Concepts Demand & Supply Flashcards

1
Q

What is price elasticity of demand? How to determine it?

A

Price elasticity of demand responsive to the quantity demanded to change in price.

If ED is greater than 1 then the demand is elastic, the change in quantity demanded
If ED s less than 1, then demand is inelastic, the change in quantity demanded is less
If ED is equal to 1, then the demand is elastic (Unitary), quantity demanded will not proportionally change.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When the increase in demand for product A increases and the demand for resources that are used to make Product A also increases what is that called?

A

The theory of derived demand is working

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

If a product increases and the product supply decreases then what will be the result of the market change?

A

Price would increase when the D curve shift to the (Right), while if the decrease in product supply this allows the supply curve to the (Left) meaning the quantity is (Uncertain)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What would economists identify “inferior” during a recent recession?

A

“Inferior” goods are based on the customer’s response to change in income.

When customers income drops and sales of production increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Using the Just in Time inventory processes, and product elastic. How can MGMT use JIT to maximize profits?

A

Here you want to Pay attention to the

Price point Supply Demand

    4                         20                                      10 
                               
   	3 		           15 				      15  

    2                         10                                       20 

     1                          5                                        25

Here you want to pay attention where the supply and demand are equal so the price point $3 is the answer in this example

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are some ways to determine the price of a product?

A
  • The quality of the product
  • The life span of the product
  • The customer preference for the quality compared to price
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

If product A has elasticity of 1.5 and Product B has an elasticity of 3.0. What effect will the price increase most likely have on the company?

A

Since the price of elastic is greater than 1 for product A & B then the revenue for both products decrease.

If price elastic is less than 1 then the revenue of both products will increase

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

The price of elasticity of demand for the two products A & B?

A

Formula:
Price elasticity of demand
Percentage change in quantity demanded / Percentage change in price

Product A Price increase 20% / Demand decrease 40%

40% / 20% = 2.00 Elastic since it’s greater than 1

Product B Price increase 30% / Demand decrease 20%

20% / 30% = 0.67 Inelastic since the rate is less than 1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

If Product A has an elasticity of 1.5 and Product B has elasticity of 3.0, what effects would it have on the revenue of the company?

A

Both Product A & B have a elastic and total revenue is decrease if the price is going to increase

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

If Product A has an elasticity of 1.5 and Product B has elasticity of 3.0, what effects would it have on the revenue of the company?

A

Both Product A & B have a Inelastic, which cause the total revenue to decrease and price to increase

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

In the market whenever the demand increases and supply decreases, what is this a prediction of?

A

Price will be increased and the supply would be uncertain

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is Price discrimination? What are the characteristics?

A

Price discrimination is where firm or entity changes their prices to different customers groups for the same products or services.

Characteristics
different elasticities of demand
Firm set the price (Monopoly)
Separate market segments
Differentiated locations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the formula for inelastic demand? How to calc it?

A

Formula is

percent change in quantity demanded / percent change in price

3% decrease in the quantity demanded / 5 percent price increase results = 0.677 which is inelastic

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is Inflation distort reported income?

A

Inflation distorts reported income by expenses items based on historical cost. Wages and sales wouldn’t be considered to distort reported income because revenue and expenses are current market conditions vs historical costs. Depreciation would be considered because the cost would be purchased in prior years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What happens to revenue when the demand for a product is inelastic?

A

The revenue will fail because the product is inelastic so the ED is less than 1 which revenue is dropped

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How to calc the nominal value of?

A

Percentage change in nominal value = New Value - Initial value / Initial value * 100

       Percentage Change in real value = Percentage change in nominal value - inflation rate

Part 1

Percentage change in nominal value = New Value - Initial value / Initial value * 100

                                          			    200 - 195 = 5 
     						              5 / 195 = 0.02564102564
  					    0.02564102564 x 100 = 2.564102564

Part 2

Percentage Change in real value = Percentage change in nominal value - inflation rate

2.564102564 - 4.00% = -1.44

Part 3

Beginning Material 195 x -1.44 = 2.80 per ton decrease

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What happens when technological advances in the production of a product to the supply curve?

A

It causes the supply curve to shift outwards which causes a decrease in prices and higher quantities of the produced product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How is GDP defined?

A

By the monetary value of all final goods and services produced within one year. It includes consumption by households, investments by business, government purchases, and net exports.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are the stages of business cycle?

A

Expansion
Peak
Contraction
Trough

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What happens during a Expansion stage of business?

A

The economy is in bull market

Inflation could be coming and it’s target rate because the growth can be overheating

Unemployment decreasing meaning people are able to find jobs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What happens during a Peak stage of business?

A

Peak is where the economy is highest limit and it’s needs to cool off

Price of Goods & Services has increased and there is growth in the economy

Unemployment is at natural rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What happens during a Contraction stage of business?

A

During the contraction stage the economy is weak and the stock market is

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

How can the Federal reserve reduce the inflationary pressure?

A

By using the contractionary monetary policies this will

  • sell the securities of treasury,
  • raising the discount rate
  • increase the reserve requirement
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is Contractionary fiscal policy?

A
  • Increase Taxes
  • Reduce spending on roads, bridges, and people who are unemployment

Goals for Contractionary fiscal policy is to prevent the economy from overheating and growing rapidly to keep a balance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is Expansionary fiscal policy?

A

To increase purchasing of securities this allows the banks to have more money to lend people

Lowering the discount rate, this will allow the increase in the money supply and more more credit available for businesses

Decrease the reserve requirements fed reduces the allows banks to have more funds available to lend consumers and businesses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

During an unexpected economic recession, which policy is best to use and why?

A

The monetary policy because it acts more quicker than the fiscal policy. During the monetary policy the reducing the interest rates will come into effect immediately to stabilize things. Also, for fiscal policies to reduce taxes that would need to be approved first from congress and that can take some time to take into effect

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What causes a federal deficit?

A

When the tax revenue is exceeded by government spending

EX - Biden sending Billions of dollars to to send to Ukraine and tax revenue is exceeds which in result will cause an increase in taxes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What strategy would the fed purse under the expansionary policy?

A

Purchase more securities, lowering the discount rate, and decrease reserve requirements for member banks that lend money to consumers and businesses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

During periods of deflation what actions are made to handle deflation?

A

Increase in the money supply

Periods of deflation are where the money supply is because during deflation prices drop and consumers and businesses focus on the cheapest price they can get. So that’s when the money supply goes up the purchase of securities are up and the discount rate is down which allows banks to have access to more cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

When the gov is concerned about the economy boom or rise of inflation, what policy would be most apprirate?

A

When the gov is concerned about an economic boom or inflation they will go to the contractionary fiscal policy

policy the gov can increase taxes by getting it approved by the congress.

Also the gov and decrease gov spending.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

How can the federal reserve fight inflation?

A

By using the Contractionary policy

  • Sell short -term U.S Treasury
  • increase the discount rate
  • lowering reserve requirements

By implement the the money supply would decrease

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

How to calc the before tax cash inflow expressed in nominal dollars?

A

Real dollars 200,000 within 2 years

inflation rate 6% for the period

So you multiply 200,000 x 1.06 x 1.06 = 224,720

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What’s the purpose of CPI?

A

To determine and compare the relative price changes over time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What does inflation do to the value of currency and assets?

A

The value of current decreases while the assets increase and dominate

Ex - 2023 the dollar is value is low and assets value are extremly high

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

What happens to revenue when ED is greater than 1?

A

Demand is elastic and total revenue decreases and prices increase

36
Q

What are some of the business risks?

A

Interest risk - market rates exceeds fixed long term rates

Liquidity rate risk - funds won’t be able to cover shirt term obligations

Market risk - sales or asset value decline

Credit risk - customers or borrows fail to pay (Ex - line of credit we used for BP Gas)

37
Q

What are the Currency or foreign exchange risk?

A

Transactions risk - when the buys products from a foreign company prices of products is denominated in selling company currency or has received in a foreign currency.

  Translation risk - when a parent company faces loses by owning a foreign subsidiary and the financial statements are denominated in that country currency are translated into parent company’s currency. 

  Economic Risk - when a company’s market value changes rapidily and the currency changes as well in a rapid matter
38
Q

What is forward contract? And when should you use it?

A

Guarantees locks in and the exchange rate for the future date. It provides exporters with protection against a negative fluctuation in exchange rate

39
Q

When a US parent company is reviewing their cash flow from it’s international subsidiaries. What would be the primary consideration in the company cash flow analysis?

A

Repatriation restriction would be reviewed because is what brings in the money into the US. US companies want to ensure their funds are in the US since they’re not there physically

40
Q

Types of exchange rate system

A

Free fluctuation floating - exchange rates that move freely which is set by the supply and demand of the currency

Fixed - A country’s central banks buys and sells foreign currencies as they are needed to maintain it’s exchange rates “fixed”

Managed - mixture of floating and fixed exchange rate systems

41
Q

What causes a currency of stable countries to appreciate?

A

What causes currency of stable countries to appreciate are the following:

  • lower inflation
  • higher real interest
  • trade surplus
42
Q

Which economic market structure is characterized by low barriers to entry and numerous competitors selling differentiated products?

A

Monopolistic competition because it has low barriers to entry and

43
Q

What happens to foreign country currency when it depreciates against the US Dollar?

A

The foreign currency become less expensive for individuals and business who make purchase in the US dollar

44
Q

When should a US based company hedge its transaction because its in the short position?

A

When a company is at a short position that means they need to purchase foreign currency in order to pay off a liability. And the company they purchase foreign currency has a received the currency has a long position

Short position remember that’s the party that doesn’t have it yet (they’re short at the moment)

45
Q

What is globalization?

A

going on for many decades

Here are the aspects of
- reduced home bias
- people having more internationally diversified portfolios
- more firms are operating internally to funds on taxes and labor
Ex - Nike making shoes at China

46
Q

How to calc the value change of a company investment in the U.S Dollar?

A

Percentage change in value = (Current value - Initial value) / initial value

1.00 / 2.57 FC = 0.38911 (Current value)
1.00 / 3.15 FC = 0.31746 (Initial value)

Current value 0.38911 - Initial value 0.31746 / Initial value 0.31746

-0.0716 / 0.31746 = -0.1840096631 decrease since a negative number

47
Q

What happens to imports and exports when the US dollars

A

Imports will be increased because when US dollar goes down additional funds are needed to pay for imports.

Ex - Toyota would get more expensive than a Ford

Exports will be decreased as foreign purchasers would pay less for U.S exports because currency buys more U.S dollars exports prices fall

48
Q

When the foreign currency becomes weak compared to the US dollar, what happens to prices of goods?

A

Prices of goods become cheaper for foreign in the US and increase in exports

49
Q

What ED is greater than 1 and it’s elastic what happens to revenue?

A

Revenue will Decreases while prices will increase

50
Q

What are the characteristics of monopolistic competition?

A
  • Low barrier to entry easy to enter and exit the market

Which return cause price of products to be high

  • Differentiated products
    Ex - Would be iPhone & Starbucks
    cause that’s the only products they sell and they’re looking to sell to those shoppers
51
Q

What are the effects on housing sector and trade deficit?

A

Housing sector would increase because houses are more affortable relatively low prices and rising incomes

Trade deficit would decrease

52
Q

What is keynesians view economic systems?

A

the cause of business cycle fluctuations are from inadequate demand

52
Q

What is stagflation like?

A
  • High inflation
  • High rising prices of goods
  • High unemployment

this causes an increase in production in labor and energy

Solutions to this is to focus on supply side of polices

53
Q

An example of perfectly competitive financial market?

A

Is when no single trader can have an impact on the market price

54
Q

What are ways the federal reserve increase the money supply?

A

Remember when the the federal reserve wants to get out of a recession or the economy is slow and high unemployment the federal reserve wants to increase the “Money Supply” and use the “Expansionary policies”

  • The fed will do the following things
  • purchase more securities
  • decrease reserve requirement
  • reduce the discount rate
55
Q

What actions would the fed take to take on Inflation?

A
  • Sell more treasury
  • Increase the discount rate
56
Q

What are the characteristics of predatory pricing?

A
  • eliminate competition
  • both intent and damage must be proving in court of law (However, it’s difficult to prove because it can be disguised as intense market compeition which is legal

-

57
Q

During the peak stages of business cycle there are concerns of the economy overheating and inflation, how can the fed prevent inflation from occuring?

A

the fed will take on the following actions

  • reduce gov spending reduce the demand of good and services paid by the gov
  • increase taxes reduce the disposable income available to the taxpayers
  • increase discount rate which cause an increase of interest for debitors which slows the economy down
  • reduce the money supply because you want to get rid of the amount of money availble to spend which down the econ
58
Q

In order to address inflation, what can the fed do to address it?

A

The main objective is to increase the money supply “Expansionary”

  • Reduce the discount rate which will get more people and businesses to loan which will help the economy
59
Q

When there is a increased unemployment, decreased business investment, rising inventory levels, lower interest rates and stock prices, what is this an example of?

A

Recession

60
Q

Kinked demand curve is associated with which type of market structure?

A

Oligopoly

60
Q

What is the primary cause of fluctions in a business activity resulting in alternative rise and fall of the economic growth?

A

level of total spending on economic levels

61
Q

How can a country be able to impose countervailing duties legally under WTO rules?

A

the only way other country needs to disobey WTO panel that told to correct a problem

62
Q

What are Monopolistic Competition characteristics?

A

Low barriers to entry

63
Q

What’s the difference between US Treasury rates and corporate bond rates?

A

Default risk premium

64
Q

What happens when federal deficit increases?

A

There is a decrease in tax revenue and increased entitlement payments

the only reason there would be an increase in federal deficit because feral deficit spending exceeds tax revenues

65
Q

During expanision phase what would happen to the house sector and trade defict?

A

The housing sector would increase because because houses would be cheaper and lower interest rates to borrow money

Trade sector would also increase because of the increase in domestic income increase imports

66
Q

Which school of economic believes that the cause of business cycle fluctuations is inadequate demand?

A

Keynesian

67
Q

What business cycle typically characterized by decelerating GDP growth and accelerating inflation?

A

Late expansion

Where GDP is slowing down and accelerating inflation is slowing down as well

68
Q

Historically the duration of most expansions and recessions?

A

several years and several months

69
Q

What is the primary purpose of monitoring internal controls to verify internal control systems?

A

Risks

70
Q

Quantitative help the fed with?

A

the fed buys various securities and increases the montary base (add liquity to the econ)

71
Q

in order to address unemployment what does congree need to do?

A

reduce taxes, increase gov spending and run deficits

72
Q

When do supplier are able to influence or control buyers?

A

when supplier don’t face threat of substitute products

73
Q

How to calc before the tax cash inflows expressed in nominal dollars?

A

Real after tax cash is 200,000 x inflation predicted is 6% = 1.06 x 1.06 because the real dollar is expected to be that for 2 years.

So this is how we would calc the before the tax cash flows expressed for 2 years

200,000 x 1.06 x 1.06 = 224,720

74
Q

What is the primary purpose of the consumer price index (CPI) ?

A

Compare relative price changes over time

75
Q

What doesn’t happens during market equilibrium?

A

Effective price ceiling have lowered prices to protect the interests of consumers

there could be price controls if there was a disequilibrium so can only happen legally enforced or binding

76
Q

What type of risk is most useful when risk is being prioritized?

A

expected value

77
Q

What are the Primary concerns of macroeconomics?

A

unemployment, economic growth, and gov budget deficits

78
Q

What would cause a primary consideration in the company cash flow analysis?

A

that would be the respatriation restrictions

79
Q

Calc the change in investment in the US Dollar?

A

percentage change in value

= after the investment exchange rate exchange rate at the time of investment

(0.3174603175 0.3891050584)

-0.07164474091/ 0.3891050584

-0.1841269841

80
Q

What affect would the demand curve or supply curve have when tech advances in production of a product have?

A

only the supply curve is applied for the tech advances in the production of a product

81
Q

True regarding international trade and investment?

A

added lower value trade and dropping lower wages

82
Q

Most useful when risk is being prioritized?

A

Expected value highlights possible risks and likelihood and amount of risks into a single value

83
Q
A

BEC Cost Accounting Roger (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions