final review Flashcards
(24 cards)
define economics
the branch of knowledge concerned with the production, consumption, and transfer of wealth.
Why would you purchase MORE Coca-Cola when the price increases instead of LESS
Coca-Cola?
ANS: Perhaps you expect the price to continue
to rise so you buy more now to keep from
having to pay even higher prices later
there is no such thing as a free lunch?
trade off, make decisions
List 4 factors of production
Land = all natural resources; Labor = workers; Capital:
1. Physical Capital = physical
items like machinery,
equipment, etc…
2. Financial Capital = money
used to operate a business; Entrepreneurship =
the creative ability of persons to combine
resources in such a manner to enable them to
make a profit
identify a land resource from the list
any natural resource; nature
define and understand: Law of demand
inverse relationship between price / quantity demanded
identify substitutes or complements given price and demand changes
complements (inverse); if french fry price goes up, ketchup demand will go down. Substitues (direct) if coke price goes up, pepsi demand will go up.
define quantity supplied
amount for sale (the number of goods or services that suppliers will produce and sell at a given market price)
distinguish between microeconomics and macroeconomics.
micro= individual, macro= overall economy
understand what would cause a change in the demand for a particular product.
of customers in mkt. (direct), Consumers’ expectation of future price (direct), Popularity (direct), price of complementary good (inverse), Price of substitute (competing) good (direct), Income: normal good (direct) and inferior good (inverse)
define utility
the benefit or satisfaction a consumer derives from consuming a good or service
define: Law of diminishing Marginal Utility
as a person consumes more of a good or service, the additional satisfaction or utility they derive from each additional unit decreases
define the “TRIP” rule
Total Revenue if inelastic price,
Suppose the president of a college argues that a 25% tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is?
Inelastic; according to the TRIP rule, since price is increasing, revenue will move in the same direction.
An economist estimates that .67 is the price elasticity of demand for disposable diapers. This suggests that disposable diaper producers could:
raise the price of disposable diapers to raise more revenue; (since the value is .67<1, we know the demand is INELASTIC. so it will move in the same direction).
know the graph for a perfectly competitive firm.
demand is horizontal.
know the graph for a monopolist.
demand downward
Identify the “economic problem”
dealing with scarcity; how to satisfy unlimited wants and needs with limited resources
define: opportunity cost
what you give up; the loss of potential gain from other alternatives when one alternative is chosen.
Analyze demand and supply situation graphically (5 steps)
Market Analysis: 1) Translate the given information to 1 of 14 rectangles on table. 2) Identify the heading and direction. 3) Interpret the WORDS and ARROW from step 2. 4) Draw the picture/ graph. 5) state your conclusion regarding P and Q
Define scarcity
limited resources
Scarcity forces us to make choices.
define: Price Elasticity of Demand
% of Quantity demanded / % of price
know the value of income elasticity for “normal goods”
positive and less than 1
determine type of good given cross-price elasticity for two goods
If the cross-price elasticity is positive, the goods are substitutes; if it’s negative, they are complements
