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Economics all of year 1 > Micro 2/6 1st year > Flashcards

Micro 2/6 1st year Flashcards

(56 cards)

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1
Q

demand

A

willingness and DESIRE to purchase a product at a given price

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2
Q

effective demand

A

willingness and ABILITY to purchase a product at a given price

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3
Q

marginal utility

A

the amount of utility gained from purchasing an extra unit of good

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4
Q

law of diminishing marginal utility

A

the utility gained from extra units of a good is lower when you have many units already

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5
Q

law of demand

A

as price increases (Y axis), demand decreases (X-axis)
=(inverse relationship)

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6
Q

2 exceptions to the demand curve

A

Veblen goods- consumers may think higher prices mean better quality, so if price goes up so does demand
Speculative goods- price increase may mean investors invest in hopes the price continues to go up

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7
Q

what’s an outwards shift

A

when more of a good is being demanded at each and every price than before

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8
Q

what’s an inwards shift

A

when less of a good is being demanded at each and every price than before

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9
Q

what causes movement along the demand curve

A

price changes

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10
Q

what are 4 causes of demand curve shifts

A
  • marketing/fashion
  • changes in price of a substitute good
  • changes in price of a complementary good
  • changes in real income
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11
Q

what is a substitute good

A

if the price of good X increases, the demand for good Y increases (normal and inferior goods)

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12
Q

what is a complementary good

A

if the price of good X increases, demand for good Y decreases (printer and ink)

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13
Q

what is a real income change in relation to demand

A

the amount of purchasing power consumers have affects demand for all products

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14
Q

what’s the demand of a normal good in relation to incomes

A

demand for normal goods increase when incomes increase

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15
Q

what’s the demand of an inferior good in relation to incomes

A

demand for an inferior good decreases when incomes increase

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16
Q

what does an elasticity measure

A

the responsiveness of a variable to changes in another variable

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17
Q

what does price elasticity of demand measure

A

the responsiveness of demand to changes in price

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18
Q

formula for PED

A

proportionate change in Qd / proportionate change in P

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19
Q

what values are perfectly elastic

A

negative infinity to infinity

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20
Q

what range of values are elastic demand

A

PED<-1 and PED>1

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21
Q

what range of values are inelastic demand

A

-1<PED>1</PED>

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22
Q

what value is perfectly inelastic

A

0

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23
Q

what values are unit elastic

24
Q

what does income elasticity of demand measure

Study These Flashcards
A

the responsiveness of demand to changes in income

25
formala for YED
proportionate change in Qd / proportionate change in Y
26
what is the relationship between real incomes and Qd for a normal good, and which way does this shift the demand curve
direct relationship, increase in incomes causes an increase in Qd. shifts the demand curve outwards
27
what is the relationship between real incomes and Qd for an inferior good, and which way does this shift the demand curve
inverse relationship, increased income causes a decrease in Qd. inwards shift in the demand curve
28
what is the YED value for a normal good?
YED>0 (both positive numbers)
29
what is the YED value for inferior goods?
YED<0 (one is positive the other is negative)
30
what is the YED value for luxury goods?
YED>1
31
what is the YED value for necessary goods
0
32
what is the law of supply? (PES)
there is a direct relationship between price and quantity supplied by producers
33
why is there a direct relationship between price and quantity supplied?
profit incentive- a price increase means more can be made from each unit sold so incentivises producers to expand production production cots- as more units are produced, costs of production increase, so to maintain profit levels, prices have to increase to compensate for extra costs
34
what is ceteris paribus
all other factors remain constant
35
what is an outward shift in supply curves
more of the good is being supplied at each and every price level than before
36
what is an inwards shift in supply curves
less of the good is being supplied at each and every price level than before
37
what causes a movement along the supply curve
price changes
38
what are 4 causes of supply curve shifts
- changes in cost of production - introduction of new technology - factors out of human control - government taxes +subsides
39
what is the definition of the costs of production
costs of all inputs required to make a good
40
what causes an inwards shift in the supply curve (cost of production)
increase in costs of production
41
what causes an outwards shift in the supply curve (cost of production)
decrease in costs of production
42
4 examples of costs of production
labour costs, tax rates, interest rates, fuel costs
43
what technological change causes an outwards shift in the supply curve
improvements in technology
44
what technological change causes an inwards shift in the supply curve
regression in technology
45
examples of technological changes
machinery, fuel efficient stuff, efficient labour processes
46
what is indirect taxation and how does this affect the supply curve
increase of cost to consumer, so shifts supply curve inwards
47
what is a subside and how does in affect the supply curve
decreases the cost to a consumer, so shifts supply curve outwards
48
what is direct taxation
tax paid directly by an individual to a government e.g. income tax
49
what is indirect taxation
tax which is not directly payed to the government by an individual e.g. expenditure tax
50
what is unit tax
an amount firms pay for each unit produced e.g. alcohol duty (parallel inwards shift)
51
what is the equation for PES
proportionate change in quantity supplied/proportionate change in P
52
Is PES always positive or negative
always positive due to direct relationship
53
what is cross elasticity of demand (XED)?
what happens to the demand of good A when the price of good B increases
54
what is the equation for XED
proportionate change in QDa / proportionate change in Pb
55
what type of good has XED greater than 0
substitute (QDa is positive and Pb is positive)
56
what is the XED value for a complementary good
XED<0 (one is positive one is negative)

Economics all of year 1 (6 decks)

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