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Econ 1 > Midterm 1 > Flashcards

Midterm 1 Flashcards

1
Q

Factors of production

A

Land, labor, capital (human and physical)

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2
Q

Law of demand

A

Higher price = lower quantity demanded

Demand curve sloping downward

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3
Q

Movement vs shift

A

Movement: going from one point in graph to another

Shift: change in quantity demanded/supplied as a result of a price change

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4
Q

3 principles of economics

A

Individual choices when resources are scarce

Opportunity cost

Decision at the margin

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5
Q

What causes shifts?

A

Change in…

Input price, price of related goods, technology, expectations, number of producers

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6
Q

Changed in equilibrium

A

When both supply and demand curves shift

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7
Q

Income effect

A

Change in quantity demanded as a result from change in consumer’s income

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8
Q

Substitution effect

A

Change in quantity demanded as a result of change in relative price of good

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9
Q

Inferior good

A

A good for which demand increases when income falls

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10
Q

Elasticity

A

Percent change in quantity demanded divided by percent change in price

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11
Q

Perfectly elastic demand

A

Very responsive to price change

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12
Q

Perfectly inelastic demand

A

Not very responsive to price change

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13
Q

As slope of demand curve gets larger…

A

It becomes more inelastic

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14
Q

Willingness to Pay

A

Max price at which consumer is going to buy the good

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15
Q

Reallocating among buyers

A

Lowers consumer surplus

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16
Q

Reallocating among sellers

A

Lowers producer surplus

17
Q

Price ceiling

A

Maximum price

Inefficient allocation to consumers, waster resources, inefficiently low quality, black markets

18
Q

Price floor

A

Minimum price

Inefficient allocation of sales among sellers, wasted resources, inefficiently high quality, illegal activity

19
Q

Quantity controls or quotas

A

Limit number of sales at fixed quantity

Deadweight loss (lost if inefficiency)

20
Q

Incidence of tax

A

How burden of tax is divided between consumers and producers

21
Q

Benefits principle

A

People who benefit should pay taxes

I.e. Gas tax

Econ 1 (3 decks)

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