lessons 4 and 5

Question 1

What is comparative statics?

Answer 1

Studying ow supply and demand curves shift

Question 2

what direction his an increase in demand and supply

Answer 2

increase = shift to the right

Question 3

What direction is a decrease of supply and demand

Answer 3

decrease = shift to the left

Question 4

What are the shifts of demand?

Answer 4

price, consumer taste, # of buyers, income, compliments, substitutes

Question 5

what is an inferior good?

Answer 5

a good like ramen that when poor gets bought more but when incomes goes up it decreases

Question 6

what is a normal good?

Answer 6

a good like steak that when poor gets bought less but when incomes goes it gets bought more.

Question 7

What is elasticity?

Answer 7

A measure of the responsiveness of one variable to change in another variable

Question 8

What’s is a substitute?

Answer 8

a good that performs similar function or satisfy a similar human desire.

Question 9

What is a complement?

Answer 9

a good that are more valuable when consumed together.

Question 10

What is cross-point elasticity of Demand?

Answer 10

The effect that a change in the price of one good has on the Demand for another good.

Question 11

What are the shifts of the supply curve?

Answer 11

price, # of sellers, technology, input price, taxes and subsidies.

Question 12

what do taxes do to suppliers.

Answer 12

shifts to the left because it takes away from the business profits.

Question 13

what do subsides do to suppliers.

Answer 13

shifts to the right because it gives government money to the business.

Question 14

what is the formula for elasticity?

Answer 14

Ey,x = percentage change of Y/ percentage change of X

Question 15

what is the formula for own-price elasticity of demand?

Answer 15

the responsiveness of the quantity demand/ by the price of the good (will always be negative)

Question 16

what is the formula for own-price elasticity of supply?

Answer 16

the responsiveness of the quantity supplied/ by the price of the good (will always be positive)

Question 17

What do elasticity classifies as inelastic?

Answer 17

When the absolute value of a good’s price is less than 1

Question 18

What do elasticity classifies as elastic?

Answer 18

When the absolute value of a good’s price is greater than 1

Question 19

how do you calculate TR (total revenue)

Answer 19

TR = P * Q

Question 20

when |E|= 0 what does it classify as?

Answer 20

perfectly inelastic

Question 21

when |E|=∞, what does it classify as?

Answer 21

perfectly elastic

Question 22

what is the demand curve made up of?

Answer 22

the set of maximum buying prices.

Question 23

what is the supply curve made up of?

Answer 23

the set of minimum buying prices.

Question 24

What is consumer surplus?

Answer 24

the measure of the gain that the buyer experiences from an exchange.

Question 25

What is producer surplus?

Answer 25

The measure of the gain that the seller experiences from an exchange.

Question 26

What is the total gain from trade?

Answer 26

The sum of consumer and producer surplus.

Question 27

What is a shortage?

Answer 27

when the quantity supplied is lower than the quantity demanded.

Question 28

What is a surplus?

Answer 28

when the quantity demanded is lower than the quantity supplied.

Question 29

What is dead weight loss?

Answer 29

Gains from trade that are not being made

Question 30

What is economic efficiency?

Answer 30

A situation in which all possible gains form trade are being made.

Question 31

Who is an entrepreneur?

Answer 31

Someone who takes advantage of profit opportunity in the market.

Question 32

What is a price control law?

Answer 32

A law that mandates what price buyers and sellers must trade at.

Question 33

What is an effective price control?

Answer 33

A price control law that keeps the price above or below the market-clearing price.

Question 34

What is a price ceiling?

Answer 34

A law that prohibits people from trading at a price above a legal maximum.

Question 35

What is a price floor?

Answer 35

A law that prohibits people from trading at a price below a legal minimum.

Question 36

What is caused from a maximum price control law?

Answer 36

Creates shortage, benefit some consumers, harms producers, does more harm then good.

Question 37

What is caused from a minimum price control law?

Answer 37

Creates surplus, benefit some producers and harm others, harms consumers, does more harm then good.

Question 38

What is a rent control law?

Answer 38

A maximum price control on rental housing. creates housing shortage

Question 39

What are rationing laws?

Answer 39

laws that restrict peoples consumption of certain goods.

Question 40

What is price gouging, and price gouging laws?

Answer 40

Price gouging is when prices are to high. Price gouging laws are a maximum price control law.

Question 41

what is the unemployment rate?

Answer 41

The percentage of the population that is actively looking for a job but has no work.