Flashcards in economics 301-375 Deck (75):
For a price ceiling to achieve its purpose, it must be imposed (above or below) market equilibrium
For a price floor to achieve its purpose, it must be imposed (above or below) market equilibrium
A shortage is a normal result of a price (floor or ceiling)
If the government sets a minimum exchange price above market equilibrium, resulting in a quantity supplied in excess of quantity demanded, what has been imposed?
a price floor
If the government sets a maximum exchange price below market equilibrium, resulting in a quantity demanded in excess of quantity supplied, what has been imposed?
a price ceiling
What effect does a price floor set below the equilibrium price have on market?
prices go up on demidec CDROM software, and overall revenue stays the same. this means that demand is=n this price range is...
the price of one good goes up. as a result, the demand for another good decreases. what is the relationship of the two goods?
the two goods are complements
if demeand for a good is relatively inelastic, then an increase in price will
have little effect on quantity demanded
if price elasticity is less than one, then demand is
demand increases and supply decreases. what happens to equilibrium price
what are substitute goods?
goods that can replace one another or that are made with essentially the same resources
what are complementary goods
goods that are purchased together sch that the demand for one can directly affect the demand for the other. the classic exanple: hot dogs and hot dog buns
demand decreases. what happens to equilibrium quantity & price
demand increases and supply increases. what happens to equilibrium price
the change is indeterminate
the number of remote control producers shrinks. the supply of remote controls...
remote control producers learn that due to government intervention, the price of remote controls will increase in four weeks. short term supply....
what is the difference between a superior good and a normal good?
nothing- they are the same
explain the budget constraint
consumers are forced to sacrifice some wants for others because of limited income
what is a durable good
a good for which consumers have more elastic demand. if income changes or prices rise, consumers can reasonably hold off on buying durable goods, such as yachts, houses cars
after competition, what happens to demand for flashcards?
when a person's income goes up, he buys more tomatoes. tomatoes are what kind of good?
normal or superior goods
in which type of economic system are consumers free to buy anything they can afford?
a pure market system
what type of incentive is an individuals right to private property
positive and non monetary
prior to 1978 what type of of economic system was in place in china?
a mostly command system
what is market power?
a firms ability to raise prices without losing customers
in which type of economic system are sellers free to produce and sell anything they expect to be profitable
a pure market system
in a command economy, who or what answers the question of "who will receive the benefits of production?"
a central authority
in a mixed market economy, how is the question "what to produce" answered?
by a combination of central authority and market forces
what type of economic system was in place in the former soviet union?
a centrally-planned system
what are the three main types of economic systems?
traditional, planned/command, and mixed market systems
since 1978 what has been the general nature of the changes in chinas economic system?
the government has begun to relinquish some of its strict control and allow an increasing amount of market-oriented economic activity
what kind of of industry is most likely to be a target of economic regulation?
any industry in which a monopoly seems possible or desireable
what is a concentrated industry?
an industry in which only a few firms are responsible for the majority of sales
(Absolute/Comparative) advantages depend on relative costs.
comparative (Economics by Paul Samuelson, p835)
In a market economy, who or what answers the question of "who will receive the benefits of production"?
What type of economic system is in place in North Korea?
a mostly command system
What are the three basic economic questions that every system must answer?
What to produce (and in what quantity)? For whom to produce? How to produce?
What is the most competitive kind of pure economic system?
a market system
In a command ecnomy, how is the question of "what to produce" answered?
by a central authority
In which type of economic system are all resources owned by the public?
a command/planned system
In a market economy, what is a firm's incentive to eliminate competition?
to increase market power
In which type of economic system do individuals have government protection for their rights to private property?
a mixed market system
In a mixed market economy, who or what answers the question of "who will receive the benefits of production"?
either by a central authority or by market forces
What is the least competitive kind of our economic system?
a command/planned economic system
What type of economic system is in place in India?
a mixed market system, largely based on tradition
what is the intended consqeuence of a decision?
the desired result of a decision; the reason the decision is made
what is the unintended consequence of a decision?
the unwanted and inexpected result of a decision
what would cause an economic decision to be difficult to make?
if there were only a small difference between the benefits and the costs of the alternatives
what is the present consequence of a decision?
the result that happens when the decision us made or soon afterwards
what type of consequences would a president facing reelection MOST be concerned with in regards to his actions?
the present consequences
what two factors of production are non human resources?
land and capital
what is a trade off
a decision to give up something in order to have something else
what is the basic economic problem
in a market economy who or what answers the question of how to produce
either by a central authority or by market force
in a command economy who or what answers the question of how to produce
a central authority
do economists think people act out of self interest
many production possibilties frontiers compare the production of capital and ....... goods
true or false- self interest is the same as selfishness
self interest is a result of the value of (public/private) property
when a nation moves from one point on its production possibilities curve
not all resources are being used efficiently the economy could produce more but it is not doing so
describe the shape of a production possibility curve for two goods that use the same productive inputs
a straight line
why does the production possibility curve have a downward slope
any increase in the production of one good decreases the production of the other
the trade off between guns and ..... is often used to refer to the choice between military and civilian goods
how does the law of increasing opportunity cost affect the shape of a typical production possibilities curve
it causes it to bow outward
a graph that shows all the combinations of guns and butter that a nation can produce is an example of what type of curve
a production possibility curve
typically, a nation's production possibility curve is bowed (inward/outward)
the production possibility curve us bowed outward due to the law of (increasing/decreasing) opportunity costs
if the production possibilities of two goods can be represented graphically as a straight line what can we infer about the relationship between the two?
the two goods use the exact same combination and amount of productive inputs
the supply curve shiftsto the left. is there more or less produced at any given price?
true or false- a change in the price of substitute goods changes demand for a good
the slope of the demand curve is
what is a non durable good?
a good for which the consumers have mainly inelastic demand. although income may change or prices may rise, consumers cannot sacrifice many non-durable goods
the prices of substitutes and complementary goods affect the (supply/demand) for a good