Brainscape's Knowledge GenomeTM

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


See full index

Economics > Final Exam (General Concepts + Supply and Demand) > Flashcards

Final Exam (General Concepts + Supply and Demand) Flashcards

1
Q

Economics is?

A

the study of the efficient allocation of scarce resources.

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

Microeconomics is?

A

the study of the economics of a single business or organization

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

Value is?

A

“weight” an individual assigns to an item (differs from person to person)

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

Creating value (in general terms)

A

Value is created by free exchange.

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

Labor Theory of Value is?

A

a controversial concept stating, “the value of a product or service is equal to the amount of human labor required to provide the product or service.”

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

Problems with the labor theory of value?

A
  • fails to define some sort of standard unit of labor (different people bring to work different skills and energies)
  • fails to account for machines and raw materials
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Who supports the labor theory of value?

A

Marxists and certain socialists and progressives

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

Utility is?

A
  • closely related to value
  • a measure of satisfaction or benefit a person receives by consuming a good or service.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Marginal utility?

A

amount of satisfaction gained from consuming the next unit of the good or service.

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

Law of Diminishing Returns

A

Marginal Utility of something diminishes as you consume more and more of it

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

Indifference curve is?

A
  • a function
  • a curve that shows a mixture of two+ widgets that provides the same amount of utility
    (look at picture)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Substitution

A

the willingness to use one product in place of another

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

Multiple Indifference Curves

A

As the curve moves outwards, it’s utility increases.
(look at pictures)

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

Budgetary Constraint can be called…

A

Consumption Possibility Curve
Production Possibility Curve
STRAIGHT LINE (see pictures)

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

Budgetary Constraint (straight line)

A

A function ( downward slope) that shows budget limits and how they affect indifference curves.
- The area to the right of the line indicates goods that cannot fit within the budget
- The area to the left of the line indicates goods that can fit within the budget

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

Opportunity costs

A

If you choose one thing from a list of choices, you give up the possibility of choosing the rest of the choices.

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

Money (in general terms)

A

medium of exchange
serves as a store of value
accounting unit
no longer has intrinsic value (value depends on the willingness of people to use it as a mode of exchange and unit of accounting)

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

Market economy

A

An economy based on “free-market” or “free-enterprise” forces.
Allows prices and resource allocation to be set by the interaction of many individuals (buyers and sellers) acting out of their own views of relative values.

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

Perfect Competition in Free Market Conditions (4)

A
  • Everyone has perfect knowledge of prices.
  • Suppliers can freely enter or leave the market without cost (money or time)
  • Transportation costs (money or time) are effectively zero.
  • Similar products are understood to be the same (in spite of advertising attempts)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Perfect Competition NOT Possible

A
  • The market is too large to be skewed by the actions of a few suppliers or buyers.
  • The government enforces contracts but does not skew the market.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Command/Planned Economy

A

relies on a central authority to lay out what is to be produced and how it is to be distributed

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

Mixed Economy

A

Operates as a command economy in some areas and market economy in others

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

Adam Smith

A

Brought clarity to our understanding of the Law of Supply and Demand and the setting of prices
- Introduced the Invisible Hand concept

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Supply?

A

the amount of good or service that is available for exchange at a given price

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

Demand?

A

amount of good or service that is sought in an exchange at a given price

26
Q

Supply Function

A

compares how much of an item would be produced and brought to market at a given price (item produced to price)

27
Q

Demand Function

A

compares how much of an item would be sought at a given price (item sought to price)

28
Q

Supply vs Quantity Supplied

A

Supply - function showing the relationship between quantity offered and price
Quantity Supplied - the amount that was actually sold

29
Q

Demand vs Quantity Demanded

A

Demand - function showing the relationship between quantity bought and price
Quantity Demanded - the amount that was actually bought

30
Q

Low prices (Supply vs Demand)

A

Less is offered in the market
People are willing to buy more of the product

31
Q

High Prices (Supply vs Demand)

A

More is offered in the market
People are less willing to buy more of the product

32
Q

Equilibrium Price

A

The market is cleared at this price (suppliers are willing to produce and bring to market the amount that buyers are willing to purchase)

33
Q

Demand Curve

A

curve/straight line sloping downwards

34
Q

Supply Curve

A

curve/straight line sloping upwards

35
Q

Equilibrium Point on a Chart

A

The point where the supply and demand curves meet is the equilibrium point.

36
Q

An increase in the demand curve…

A

Moves the curve outwards
Indicates more widgets at a higher price

37
Q

An increase in the supply curve…

A

Moves the curve outwards
Indicates more widgets at a lower price

38
Q

Why would demand increase?

A
  • The product could become more desirable.
  • The demand for a product related to the original could increase, increasing the demand for the original item. (Ex. whiteboard and markers)
39
Q

Why would supply increase?

A
  • More efficient production methods
  • Reduced taxes
  • Reduced regulatory costs
  • Reduced Costs of Materials and Energy
40
Q

Equilibrium Point (in terms of supply and demand increase)

A

Demand shift - increases equilibrium price
Supply shift - decreases equilibrium price

41
Q

Invisible Hand

A
  • Contrast to the Command Economy
  • When people operate purely out of self-interest without external compulsion, they interact in markets in ways that caused scarce resources to be allocated to create the greatest benefit for the population.
42
Q

What steers the invisible hand?

A

Price :)
- Condenses all sorts of information into a single variable
- Steers decisions about purchases, sales, investments, risks, alternatives, etc.

43
Q

Invisible Hand vs Command Economy

A

Command economy lacks valuable information (price) provided in a free market system. It suffers from inefficient allocation of scarce resources.

44
Q

Scarcity

A

The quantity of a resource is finite and cannot meet the total quantity demanded if the resource or product was freely available.
The product remains available as long as one is willing to pay the price.
(Tickets to a concert)

45
Q

Shortage

A

The product is unavailable.
Caused by external forces (govt) trying to set a price limit.

46
Q

Price Gouging Laws

A
  • laws meant to keep prices from going too high
  • unintendedly bad idea
47
Q

Demand vs Supply of Gas (Normal)

A

Increase of cars on the road –> Increase of demand for gas –> Causes equilibrium price to increase –> Supply stays the same –> Demand moves outward

48
Q

Demand vs Supply of Gas (Price-Gouging Laws)

A

Increase of cars on the road –> Increase of demand for gas –> Causes equilibrium price to increase (market) –> government mandates the same price –> demand exceeds supply –> causes shortage

49
Q

Demand vs Supply of Labor (Price-Gouging Laws)

A

Minimum Wage (more than market) –> more people are willing to work —> less people are willing to hire –> creates a shortage of jobs

50
Q

Elasticity

A

Used to describe how consumers respond to changes in price for a good or service

51
Q

Elasticity Formula

A

% change in quantity demanded / % change in price

52
Q

Elasticity > 1

A

Elastic

53
Q

Elasticity < 1

A

Inelastic

54
Q

Elastic Products?

A

Clothing or Electronics

55
Q

Inelastic Products?

A

Salt or Gas

56
Q

Elasticty = 1

A

Unitary –> change in quantity is directly proportional to a change in price

57
Q

Consumer Choice influences price settings

A

What are the factors that influence the buying choices consumers make? Theory is still evolving.

58
Q

Rational Actor Consumption

A

Simply stated… “People’s allocation choices are random.”
- Depends on what item people assign greater value to.

59
Q

Rational Actor Consumption Ex.1.

A

Candy Bar = $1.15
Bag of chips = $1.15
The consumer will buy what he wants most since it’s the same price.

60
Q

Rational Actor Consumption Ex.2.

A

Candy Bar = $1.15
Bag of Chips = $1
The consumer is likely to buy the bag of chips since the price is lower.

Economics (5 decks)

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