Microeconomics Flashcards Preview

Economics > Microeconomics > Flashcards

Flashcards in Microeconomics Deck (24):
1

Types of markets

Factor markets (factors of production, incl. labor) and goods markets (outputs of production)

2

Supply

Willingness of sellers to offer given quantity of good or service for given price

3

Demand

Willingness and ability of consumers to purchase given amount of good or service for given price

4

Causes of shifts in supply/demand and along curves

Changes in price cause shift along curve. Change in any other variable causes change in supply/demand.

5

Process of aggregating demand and supply curves

Multiply functions by number of buyers/sellers

6

Equilibrium

Condition in which quantity willingly offered for sale by sellers at given price is equal to quantity demanded by buyers at same price.

7

How equilibrium achieved

Market mechanism - excess supply causes price to fall, excess demand causes price to rise

8

Stable vs. unstable equilibria

Stable - whenever price disturbed from equilibrium, price tends to converge back

Unstable - price will rise or decline away from equilibrium

9

Calculate inverse demand and supply functions

Inverse functions are rearranged solving for price.

10

Calculate excess demand and supply

Plug price into demand and supply functions. Difference is excess supply or demand.

11

Describe types of auctions and calculate winning prices

Ascending price - classic
Sealed bid - good for common value items
Descending price

12

Consumer surplus

difference between value consumer puts on item and amount of money required to pay for it

13

Producer surplus

difference between total revenue sellers receive from selling a given amount of a good and total variable cost of producing that amount

14

Total surplus

difference between total value to buyers and total variable cost to sellers

15

How government intervention and regulation affect demand and supply

Taxes fall hardest on party with steepest curve

16

How addition/removal of market interference affects price and quantity

Price ceilings (reduce supply), price floors (reduce demand)

17

calculate cross-price elasticities of demand and describe factors affecting measures

percentage change in quantity demanded of X / percentage change in price of Y

Positive if goods are substitutes
Negative if goods are complements

18

Partial equilibrium analysis

hold exogenous variables constant and concentrate on one market

19

General equilibrium analysis

Look at all markets together

20

Deadweight loss

surplus lost by buyer/seller but not transferred to anyone

21

How to graph supply and demand curves

Solve equations for Price and graph

22

Calculate price elasticity

percentage change in quantity demanded / percentage change in price

23

Elasticity measurements

Inelastic = less than 1
Elastic = greater than 1
Unit elastic = 1

24

Income elasticity

percentage change in quantity demanded / percentage change in income

normal goods are positive
inferior goods are negative