Section 2 Modules 5-9 Flashcards
(137 cards)
1
Q
What is a competitive market? and how it is described by the supply and demand model?
A
a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is soldThe supply and demand model shows the behavior of the competitive market
2
Q
What is a demand curve?
A
a graphical representation of demand schedule. It snows the relationship between quantity demanded and price
3
Q
Demand Schedule
A
shows how much of a good or service
4
Q
Market
A
group of producers and consumers who exchange a good or service for payment
5
Q
Supply and Demand Model
A
model of how the competitive market works
6
Q
Quantity Demanded
A
the actual amount of a good or service consumers are willing and able to buy at some specific
7
Q
Demand Curve
A
a graphical representation of demand schedule. It snows the relationship between quantity demanded and price
8
Q
Law of Demand
A
says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service
9
Q
Change in Demand
A
is a shift of the demand curve, which changes the quantity demanded at any given price
10
Q
Movement along the Demand Curve
A
a change in the quantity demanded of a good that is the result of a change in that good’s price
11
Q
Substitutes
A
two goods are substitutes if a rise in a price of one of the goods leads to an increase in the demand for the other good
12
Q
Complements
A
two goods complements if a rise in the price of one of the goods leads to a decrease in the demand for the other good
13
Q
Normal Good
A
when a rise in income increases the demand for a good-the normal case- it is a normal good
14
Q
Inferior Good
A
When a rise in income decreases the demand for a good, it is an inferior good
15
Q
Individual Demand Curve
A
illustrates the relationship between quantity demanded and price for an individual consumer
16
Q
Price Causation Factors
A
Income EffectsLower P (prices), purchasing power increaseHigher P, purchasing power decreasesSubstitution EffectLaw of Diminishing Marginal Utility
17
Q
Demand
A
Inverse relationship b/w P and Q (quantity demand)
18
Q
When will there be movement ALONG the curve?
A
If there is a change of P of the same good, that the change of Q will move it along the curve, not shift it.
19
Q
Determinants of Demand: these cause a shift of the curve (5) TPEIP
A
△taste △population △expectation △income △P of related goods (subs and comps)
20
Q
What is the difference between movements along the supply curve and changes in supply
A
the shift in the supply curve are by the determinants of supply and the movement along the supply curve is the change of P of the same good.
21
Q
Quantity supply
A
the amount of goods or services a producer is willing to sell at some specific price
22
Q
Supply schedule
A
how much good or service producers will supply at different prices
23
Q
Supply Curve
A
shows the relationship b/w Qs and P, basically graphs the supply schedule
24
Q
Law of Supply
A
the direct relationship between Price and Quantity supply
25
change in supply and what are the factors that cause the shift
is a shift of the S curve in which the quantity supplied changes△ technology△ expectation of sellers△ # of suppliers (producers)△ P of related goods or services△ in input prices (resource prices)Taxes and government subsidies
26
Movement along the supply curve
A change in Qs on the curve of a good because a change of the SAME good's price
27
Input
Anything that is used to produce a good or service
28
Individual supply curve
the relationships between Qs and P for an individual producer
29
Equilibrium
an economic situation in which no individual would be better off doing something different
30
equilibrium price
When Qs = Qd also known as the market clearing price
31
equilibrium quantity
the quantity of the good bought and sold at the equilibrium price is called the equilibrium quantity
32
Why does the market price fall if it is above the equilibrium price
Because there is a surplus there for Qs > Qd and bring the prices back down will make buyers buy the supply again because it will being towards back to equilibrium
33
Price about its equilibrium creates a ______
surplus
34
Surplus
of a good is when Qs > Qd because P is above the Equilibrium point
35
Shortage
when Qd > Qs because P is below the equilibrium point
36
Why does the market price rise if it is below the Equilibrium price
Because there is high demand so sellers can jack their price back up and it will bleed off the shortage and go back to equilibrium
37
Price below its Equilibrium level creates a ______
shortage
38
How equilibrium price and quantity are affected when there is a simultaneous change in both supply and demand
depends on graph
39
What happens when a demand curve shifts [7]
When the demand curve shifts to the right, meaning increase in demand, that means the prices go up and Qs goes up as well.When the demand curve shifts to the left, meaning D goes down, that means the Price goes down and the Qs goes down as well.
40
What happens when the supply curve shifts [7]
If the supply curve shifts to the left meaning Supply has gone down due to the determinants of supply, that means the Qs goes down, however P depends on how dramatically the supply goes down.Now if the supply shifts to the right meaning supply goes up, then P goes down (usually) and Qs goes up
41
Simultaneous shifts of Supply and Demand Curves
check the graph
42
Factors that shift supply Change in Input prices
If an input used to produce A rise, supply of A decreases to the leftIf P of input used to produce A falls then supply of A increases (shifts right)
43
Change in P of related goods or servicesIf A and B are substitutes in production
if price of B rises then supply of A decreasesif price of B falls then supply of A increases
44
Change of P of related goods or servicesIf A and B are complements in production
If price of B rises then supply of A increasesIf price of B falls then supply of A decreses
45
Changes in Technology
If technology used to produce A improves then supply of A increases
46
Changes in expectations
If price of A is expected to rise in the futures than supply of A decreasesIf price of A is expected to fall in the future than supply of A increases
47
Change in number of producers
If number of producers for A rises then supply of A increases
If number of producers falls for A then supply for A decreases
48
What is a competitive market? and how it is described by the supply and demand model?
a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is soldThe supply and demand model shows the behavior of the competitive market
49
What is a demand curve?
a graphical representation of demand schedule. It snows the relationship between quantity demanded and price
50
Demand Schedule
shows how much of a good or service
51
Market
group of producers and consumers who exchange a good or service for payment
52
Supply and Demand Model
model of how the competitive market works
53
Quantity Demanded
the actual amount of a good or service consumers are willing and able to buy at some specific
54
Demand Curve
a graphical representation of demand schedule. It snows the relationship between quantity demanded and price
55
Law of Demand
says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service
56
Change in Demand
is a shift of the demand curve, which changes the quantity demanded at any given price
57
Movement along the Demand Curve
a change in the quantity demanded of a good that is the result of a change in that good's price
58
Substitutes
two goods are substitutes if a rise in a price of one of the goods leads to an increase in the demand for the other good
59
Complements
two goods complements if a rise in the price of one of the goods leads to a decrease in the demand for the other good
60
Normal Good
when a rise in income increases the demand for a good-the normal case- it is a normal good
61
Inferior Good
When a rise in income decreases the demand for a good, it is an inferior good
62
Individual Demand Curve
illustrates the relationship between quantity demanded and price for an individual consumer
63
Price Causation Factors
Income EffectsLower P (prices), purchasing power increaseHigher P, purchasing power decreasesSubstitution EffectLaw of Diminishing Marginal Utility
64
Demand
Inverse relationship b/w P and Q (quantity demand)
65
When will there be movement ALONG the curve?
If there is a change of P of the same good, that the change of Q will move it along the curve, not shift it.
66
Determinants of Demand: these cause a shift of the curve (5) TPEIP
△taste△population△expectation△income△P of related goods (subs and comps)
67
What is a competitive market? and how it is described by the supply and demand model?
a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold
The supply and demand model shows the behavior of the competitive market
68
What is a demand curve?
a graphical representation of demand schedule. It snows the relationship between quantity demanded and price
69
Demand Schedule
shows how much of a good or service
70
Market
group of producers and consumers who exchange a good or service for payment
71
Supply and Demand Model
model of how the competitive market works
72
Quantity Demanded
the actual amount of a good or service consumers are willing and able to buy at some specific
73
Demand Curve
a graphical representation of demand schedule. It snows the relationship between quantity demanded and price
74
Law of Demand
says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service
75
Change in Demand
is a shift of the demand curve, which changes the quantity demanded at any given price
76
Movement along the Demand Curve
a change in the quantity demanded of a good that is the result of a change in that good's price
77
Substitutes
two goods are substitutes if a rise in a price of one of the goods leads to an increase in the demand for the other good
78
Complements
two goods complements if a rise in the price of one of the goods leads to a decrease in the demand for the other good
79
Normal Good
when a rise in income increases the demand for a good-the normal case- it is a normal good
80
Inferior Good
When a rise in income decreases the demand for a good, it is an inferior good
81
Individual Demand Curve
illustrates the relationship between quantity demanded and price for an individual consumer
82
Price Causation Factors
Income Effects
Lower P (prices), purchasing power increase
Higher P, purchasing power decreases
Substitution Effect
Law of Diminishing Marginal Utility
83
Demand
Inverse relationship b/w P and Q (quantity demand)
84
When will there be movement ALONG the curve?
If there is a change of P of the same good, that the change of Q will move it along the curve, not shift it.
85
Determinants of Demand: these cause a shift of the curve (5) TPEIP
```
△taste
△population
△expectation
△income
△P of related goods (subs and comps)
```
86
What is the difference between movements along the supply curve and changes in supply
the shift in the supply curve are by the determinants of supply and the movement along the supply curve is the change of P of the same good.
87
Quantity supply
the amount of goods or services a producer is willing to sell at some specific price
88
Supply schedule
how much good or service producers will supply at different prices
89
Supply Curve
shows the relationship b/w Qs and P, basically graphs the supply schedule
90
Law of Supply
the direct relationship between Price and Quantity supply
91
change in supply and what are the factors that cause the shift
is a shift of the S curve in which the quantity supplied changes
```
△ technology
△ expectation of sellers
△ # of suppliers (producers)
△ P of related goods or services
△ in input prices (resource prices)
```
Taxes and government subsidies
92
Movement along the supply curve
A change in Qs on the curve of a good because a change of the SAME good's price
93
Input
Anything that is used to produce a good or service
94
Individual supply curve
the relationships between Qs and P for an individual producer
95
Equilibrium
an economic situation in which no individual would be better off doing something different
96
equilibrium price
When Qs = Qd also known as the market clearing price
97
equilibrium quantity
the quantity of the good bought and sold at the equilibrium price is called the equilibrium quantity
98
Why does the market price fall if it is above the equilibrium price
Because there is a surplus there for Qs > Qd and bring the prices back down will make buyers buy the supply again because it will being towards back to equilibrium
99
Price about its equilibrium creates a ______
surplus
100
Surplus
of a good is when Qs > Qd because P is above the Equilibrium point
101
Shortage
when Qd > Qs because P is below the equilibrium point
102
Why does the market price rise if it is below the Equilibrium price
Because there is high demand so sellers can jack their price back up and it will bleed off the shortage and go back to equilibrium
103
Price below its Equilibrium level creates a ______
shortage
104
How equilibrium price and quantity are affected when there is a simultaneous change in both supply and demand
depends on graph
105
What happens when a demand curve shifts [7]
When the demand curve shifts to the right, meaning increase in demand, that means the prices go up and Qs goes up as well.
When the demand curve shifts to the left, meaning D goes down, that means the Price goes down and the Qs goes down as well.
106
What happens when the supply curve shifts [7]
If the supply curve shifts to the left meaning Supply has gone down due to the determinants of supply, that means the Qs goes down, however P depends on how dramatically the supply goes down.
Now if the supply shifts to the right meaning supply goes up, then P goes down (usually) and Qs goes up
107
Simultaneous shifts of Supply and Demand Curves
check the graph
108
Factors that shift supply
Change in Input prices
If an input used to produce A rise, supply of A decreases to the left
If P of input used to produce A falls then supply of A increases (shifts right)
109
Change in P of related goods or services
If A and B are substitutes in production
if price of B rises then supply of A decreases
| if price of B falls then supply of A increases
110
Change of P of related goods or services
If A and B are complements in production
If price of B rises then supply of A increases
| If price of B falls then supply of A decreses
111
Changes in Technology
If technology used to produce A improves then supply of A increases
112
Changes in expectations
If price of A is expected to rise in the futures than supply of A decreases
If price of A is expected to fall in the future than supply of A increases
113
Change in number of producers
If number of producers for A rises then supply of A increases
If number of producers falls for A then supply for A decreases
114
What are price controls?
are legal restrictions on how high or low a market price may go, they can take two forms, a price ceiling or a price floor
115
How does government intervene in markets?
they impose price controls
116
Price Ceiling
a maximum price sellers are allowed to charge for a good or service
117
Price floors
a minimum price buyers are required to pay for a good or service
118
How can price controls create problems and make a market inefficient
.
119
Why economists are often deeply skeptical of attempts to intervene in markets
.
120
Who benefits and who loses in price controls and why they are used despite of well known problems
.
121
Inefficient allocation to consumers
.
122
Wasted Resources
.
123
Ineffienctly low quality
.
124
Black market
.
125
Why are there price ceiling?
.
126
Minimum Wage
.
127
Ineffient allocation of sales among sellers
.
128
Inefficiently high quality
.
129
Increase in Demand (Graph)
P?
Q?
P Up
| Q Up
130
Increase in Supply (Graph)
P?
Q?
P Down
| Q Up
131
Decrease in Demand (Graph)
P?
Q?
P Down
| Q Down
132
Decrease in Supply (Graph)
P?
Q?
P Up
| Q Down
133
Increase in Demand/Increase in Supply(Graph)
P?
Q?
P Indet.
| Q Up
134
Increase in Demand/Decrease in Supply (Graph)
P?
Q?
P Up
| Q Indet.
135
Increase in Demand (Graph)
P?
Q?
P Indet.
| Q Down
136
Decrease in Demand/Increase in Supply
P Down
| Q Indet.
137
What is Elasticity
It means P sensitivity, if a good is elastic it means it has a lot of substitutes
If inelastic, then there are fewer substitutes
