Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

AP Microeconomics > Supply, Demand, Profit, Cost Curves > Flashcards

Supply, Demand, Profit, Cost Curves Flashcards

1
Q

Competitive Market

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Supply and Demand Model

A

Model of how a competitive market works

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Demand Schedule

A

Shows how much of a good or service consumers will be willing and able to buy at different prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Quantity Demanded

A

Actual amount of a good or service consumers are willing/and able to buy at some specific price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Demand Curve

A

Graphical representation of the demand schedule (relationship between quantity demanded and price)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Law of Demand

A

Higher price of a good or service, all other things equal, leads people to demand a smaller quantity of that good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Change in Demand

A

Shift of the demand curve, which changes quantity at any given price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Movement along demand curve

A

Change in quantity demanded of a good that is the result of a change in the good’s price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Substitutes

A

If a rise in the price of a good leads to a demand in the other, they are substitutes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Complements

A

A rise in the price of a good leads to a decrease in demand for other goods, they are complements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Normal Good

A

increased income increases demand for a good (Buying steak, taking cabs)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Inferior Good

A

Increased income leads to decreased demand for a good (taking the bus)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Individual Demand Curve

A

Shows relationship between quantity demanded and price for 1 consumer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Quantity Supplied

A

Actual amount of a good and service producers are willing to sell at some specific price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Supply Schedule

A

Shows how much of a good/service producers will supply at some given price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Supply Curve

A

Shows the relationship between quantity supplied and price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Law of Supply

A

Other things being equal, price and quantity supplied of a good are positively related

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Change in supply

A

Shift of supply curve, changes quantity at any given price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Movement Along Supply Curve

A

Change in the quantity supplied of a good that is the result of a change in that good’s price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Input

A

Anything that is used to produce a good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Individual Supply Curve

A

Illustrates the relationship between quantity supplied and price for 1 producer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Equilibrium

A

No individual can be better off without making someone worse; Where supply=demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Equilibrium Price/ Market-Clearing Price

A

The price at which quantity demanded=quantity supplied

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Equilibrium Quantity

A

Quantity of the good bought and sold at equilibrium price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Surplus

A

Quantity supplied exceeds the quantity demanded. Occurs when price is above its equilibrium level

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Shortage

A

When quantity demanded exceeds the quantity supplied. Shortages occur when the price is below its equilibrium level

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Price Controls

A

Legal restrictions on how high or low a market price may go

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Price Ceiling

A

Maximum price sellers are allowed to charge for a good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Price Floor

A

Minimum price buyers are required to pay for a good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Inefficient Allocation to Consumers

A

When people who want the good badly and are willing to pay a high price don’t get it, but those who care little and pay low but get the good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Wasted Resources

A

People expend money, effort, and time to cope with shortages caused by the price ceiling

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Inefficiently Low Quality

A

Sellers offer low quality goods at a low price even though buyers would prefer higher quality at a higher price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Black Market

A

Market in which goods/services are bought and sold illegally- because it is illegal to sell them at all or because prices charged are legally prohibited by price ceiling

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Minimum Wage

A

Legal floor on wage rate; which is the market price of labor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Inefficient Allocation of Sales Among Sellers

A

Would sell good at lowest price are not always those who are willing to sell it

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Inefficiently High Quality

A

Sellers offer high quality goods at a high price, even though buyers would prefer a low quality at a lower price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Quantity Control/Quota

A

Upper limit on the quality of some good that can be bought or sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

License

A

Gives its owner the right to supply a good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Demand Price

A

The price at which consumers will demand a certain quantity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Supply Price

A

Price at which producers will supply a certain quantity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Wedge

A

When Price paid by buyers end up being higher than that received by sellers, it creates a wedge

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

Quota Rent

A

Difference between demand and supply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

Price at the Quota

A

Earnings that accure to the license-holder from ownership of the right to sell the good. Equal to the market price of the license when licenses are traded

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

Deadweight Loss

A

Lost gains associated with transactions that do not occur due to market intervention

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

Utility

A

Measure of preferences over some set of goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

Law of Diminishing Marginal Utility

A

As a person increases consumption of a product while keeping consumption of other products constant, there is a decline in marginal utility that person derives from consuming each additional unit of product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

Producer Surplus

A

Prod: measure between amount producer receives and minimum amount producer is willing to accept. Different (surplus amount) is the benefit producer receives for selling

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

Consumer Choice/Optimal Purchase Rule

A

Consumer should spend budget so that marginal utility spent on all products are equal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

Allocative Efficiency

A

State of economy in which production represents consumer preferences- marginal benefit=marginal utility

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

Elasticity

A

A variable or good’s sensitivity to change of another variable. Change of demand/supply in response to price/income change

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

Total Revenue

A

Total receipts from sales of a given quantity of goods/services (Total income)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

Price Discrimination

A

Microeconomic pricing strategy where identical or largely similar goods are transacted at different prices by same provider in different markets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

Consumer Surplus

A

Difference between total amount that consumers are willing/able to pay for a good and total amount that they actually do pay

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

Substitution Effect

A

The change in the quantity of that of a good is the change in the quantity of that good demanded as consumer substitutes the good has become relatively cheaper for the good that has become relatively more expensive

55
Q

Income Effect

A

Change in the quantity of that good is the change in the quantity of that good demanded that results from a change in the purchasing power when the price of the good changes

56
Q

Price Elasticity of Demand

A

Ratio of percent change in the quantity demanded to the percent change in the price as we move along the demand curve (drop the minus sign)

57
Q

Midpoint Method

A

Technique for calculating the percent change. In this approach, we calculate changes in variable compared with the average changes in variable compared with the average or midpoint, of the initial and final values

58
Q

Perfectly Inelastic

A

Quantity demanded does not respond at all to changes in price (vertical line)

59
Q

Perfectly Elastic

A

Any price increase will cause the quantity demanded to drop to zero (horizontal line)

60
Q

Elastic

A

Price elasticity of demand is greater than 1

61
Q

Inelastic

A

Price elasticity of demand is less than 1

62
Q

Unit Elastic

A

Price elasticity of demand is exactly 1

63
Q

Total Revenue

A

Total value of sales of a good or service / (price x quantity supplied)

64
Q

Cross-Price Elasticity

A

Measure of the effect of the change in one good’s price on the quantity demanded of the other good

65
Q

Income Elasticity of Demand

A

Percent change in other good’s price

66
Q

Income elastic

A

Income elasticity of demand for that good is greater than 1

67
Q

Income inelastic

A

Income elasticity of demand for that good is positive but less than 1

68
Q

Price Elasticity of Supply

A

Measure of responsiveness of quantity supplied to the price of that good. It is ratio of percent change in quantity supplied to the percent change in the price as we move along the supply curve

69
Q

Perfectly inelastic supply

A

Price elasticity of supply is zero, changes in price of good have no effect on quantity supplied (vertical line)

70
Q

Perfectly Elastic supply

A

Quantity supplied is zero below some price and infinite above that price (horizontal line)

71
Q

Willingness to pay

A

Maximum price at which a consumer would buy a good

72
Q

Individual Consumer Surplus

A

Net gain to an individual buyer from the purchase of a good. Equal to the difference between a buyer’s willingness to pay and the price paid

73
Q

Total Consumer Surplus

A

Sum of individual consumer surpluses of all the buyers of a good in a market

74
Q

Consumer Surplus

A

Both individual and total consumer surplus

75
Q

Cost

A

Lowest price at which he or she is willing to sell a good

76
Q

Individual Producer Surplus

A

Net gain to an individual seller from selling a good. Equal to the difference between the price received and the seller’s cost

77
Q

Total Producer Surplus

A

Sum of individual producer surpluses of all the sellers of a good in a market

78
Q

Producer Surplus

A

Individual and total producer surplus

79
Q

Total Surplus

A

Total net gain to consumers and producers from trading in a market. It is the sum of producer/consumer surplus

80
Q

Progressive Tax

A

Tax that rises in proportion to income

81
Q

Regressive Tax

A

Tax that rises less than in proportion to income

82
Q

Proportional Tax

A

Tax that rises in proportion to income

83
Q

Excise Tax

A

Tax on sales of a good/service

84
Q

Tax incidence

A

Distribution of the tax burden

85
Q

Deadweight loss on a Tax

A

Decrease in total surplus resulting from the tax, minus the tax revenues generated

86
Q

Administrative Costs

A

Resources used by government o collect the tax, and by tax payers to pay/evade it, over amount collected

87
Q

Lump-Sum Tax

A

Tax of fitted amount paid by all taxpayers

88
Q

Util

A

Unit of utility (happiness)

89
Q

Marginal Utility

A

Change in total utility generated by consuming an additional unit of a good

90
Q

Marginal utility curve

A

Shows how marginal utility depends on quantity of good consumed

91
Q

Principle of Diminishing Marginal Utility

A

Each successive unit of a good consumed adds less to utility than previous units

92
Q

Budget Constraint

A

Limits cost of a consumer’s consumption bundle to no more than income

93
Q

Consumption Possibilities

A

Set of all consumption bundles that are affordable, given income and prevailing prices

94
Q

Budget line

A

Consumption bundles available to a consumer who spends all of income

95
Q

Optional Consumption Bundle

A

Consumption bundle that maximizes total utility given budget constraint

96
Q

Marginal Utility per Dollar

A

Additional utility from spending one more dollar on that good

97
Q

Optimal Consumption Rule

A

In order to maximize utility, a consumer must equate marginal utility per dollar spent on each good in the consumption bundle

98
Q

Explicit Cost

A

Cost that actually involves laying out money

99
Q

Implicit Cost

A

Measured by the value, in dollar terms, of benefits that are forgone (doesn’t require money)

100
Q

Accounting

A

Total revenue of a business minus its explicit cost and depreciation

101
Q

Economic Profit

A

Business’ total revenue minus the opportunity cost of its resources. Usually less than the accounting profit

102
Q

Implicit Cost

A

Opportunity cost of the capital used by a business- income the owner could have realized from that capital if it could have been used in its next best alternative way

103
Q

Normal Profit

A

When economic profit is equal to zero, and is just high enough to keep a firm engaged in current activities

104
Q

Principle of Marginal Analysis

A

Every activity should continue until marginal benefit equals marginal cost

105
Q

Marginal Revenue

A

Change in total revenue generated by an additional unit of output

106
Q

Optimal Output Rule

A

Profit is maximized by producing a specific quantity of output

107
Q

Marginal Cost Curve

A

shows how the cost of producing one more unit depends on the quantity that has already been produced

108
Q

Marginal Revenue Curve

A

Shows how marginal revenue varies as output varies

109
Q

Production Function

A

Relationship between the quantity of inputs a firm uses and the quality of outputs it produces

110
Q

Fixed Inputs

A

An input whose quantity is fixed for a period of time and cannot be varied

111
Q

Variable Input

A

Input whose quantity the firm can vary at anytime

112
Q

Long Run

A

Time period for which all inputs can be varie

113
Q

Short Run

A

Time period in which at least one input is fixed

114
Q

Total Product Curve

A

Shows how the quantity of output depends on the quantity of the variable of input, for a given quantity of fixed input

115
Q

Marginal Product

A

Additional quantity of output produced by using one more unit of an input

116
Q

Diminishing Returns to an Input

A

Increase in quantity, holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input

117
Q

Fixed Cost

A

Cost that does not depend on the quantity of output produced (cost of fixed input)

118
Q

Variable Cost

A

Cost that depends on the quantity of output produced (cost of the variable input)

119
Q

Total Cost

A

Sum of fixed cost and variable cost (of producing a certain quantity of output)

120
Q

Total Cost Curve

A

Shows how total cost depends on a quantity of output

121
Q

Average (Total) Cost

A

Total Cost divided by quantity of output produced

122
Q

U-Shaped Average Total Cost Curve

A

Curve that falls at low levels of output and then rises at higher levels

123
Q

Average fixed cost

A

Fixed Cost per unit of output

124
Q

Average Variable Cost

A

Variable cost per unit of output

125
Q

Spreading Effect

A

Larger output, greater quantity output over fixed cost spread (leads to lower average fixed cost)

126
Q

Diminishing Returns Effect

A

The larger the output, the greater the amount of variable input required, increasing average variable cost

127
Q

Minimum Cost Output

A

Quantity at which average total cost is lowest (bottom of U-shaped curve)

128
Q

Long Run Average Total Cost Curve

A

Shows relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

129
Q

Economies of Scale

A

Long run average total cost declines as output increases

130
Q

Increasing returns to scale

A

When output increases MORE than in proportion to an increase in all inputs (double all inputs=output more than doubles)

131
Q

Diseconomies of Scale

A

When long run average total cost increases as output increases

132
Q

Decreasing Returns to Scale

A

When output increases less than in proportion to an increase in all inputs

133
Q

Constant Returns to scale

A

When output increases directly in proportion to an increase in all inputs

134
Q

Sunk Cost

A

Cost that has been incurred and is nonrecoverable

AP Microeconomics (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions