Flashcards in Economics Deck (16):
What are the characteristics of a positive supply curve shift (shift right)?
"Supply increases at each price point
Number of sellers increase - market can get flooded
Technological advances or reduction in production costs"
What are the characteristics of a negative supply curve shift (shift left)?
"Supply decreases at each price point
Cost of producing item increases
Prices of other products
Examples: Shortage of gold- so less gold watches are made; wars or crises in rice-producing countries means there is less rice on the market"
What is a Positive Demand Curve Shift (Shift Right)?
"When demand increases at each price point
Price of substitutes go up - price of beef rises- so people buy more chicken
Future price increase is expected - War in Middle East- people go out and buy gas
Market expands - i.e. people get new free health care plan- demand at clinic rises
Income (for normal goods) - when incomes increase, demand increases"
What is a Negative Demand Curve Shift (Shift Left)?
"Demand decreases at each price point.
Price of complement goes up - price of beef goes up- less demand for ketchup
Boycott - Company commits social blunder- consumers boycott
Income (for inferior goods) - when incomes increase, demand decreases"
What is the Marginal Propensity to Consume?
"How much you spend when your income increases
Calculate: Change in Spending / Change in Income
Also, MPC = 1 - MPS"
What is the Marginal Propensity to Save?
"How much you save when income increases
Calculate: Change in Savings / Change in Income
Also, MPS = 1 - MPC"
What is the Price Elasticity of Demand?
Measures how responsive the quantity demanded is to a change in price. Ed = % change in QD/ % change in price
If Ed > 1, elastic
If Ed < 1, inelastic
If Ed = 1, unitary, unit elastic
What is the Income Elasticity of Demand?
Measures the effect of changes in (consumer) income on changes in the quantity demanded of a product. Income Elasticity of Demand = % change in QD / % change in income
If > 0, normal good
If < 0, inferior good
What is the arc method?
Ed = (change in QD/ avg QD) / (change in $ / avg $)
What is the cross-elasticity of demand?
Tells you if the goods are substitutes or complements.
% change in QD for X / % change in price of Y
If > 0, then substitute (direct relationship)
If < 0, then complement (inverse relationship)
What is the price elasticity of supply?
A measure of how quantity supplied of a good/service is to a change in price/cost.
Es = % change in QS / % change in price
If Es > 1, elastic
If Es < 1, inelastic
What is economic rent?
The surplus of choosing the best alternative
What is marginal utility?
Additional joy you get from one more unit.
What is the law of diminishing marginal utility?
The more a consumer consumers of a particular product, the less satisfying will be the next unit of that product.
What are international bodies that deal with international economic issues?