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BSNS113 > Term 1 cheat sheet > Flashcards

Term 1 cheat sheet Flashcards

1
Q

If elasticity is greater than one, the good is

A

elastic

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2
Q

If elasticity is less than one, the good is

A

inelastic

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3
Q

If elasticity is equal to one, the good is

A

unit elastic

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4
Q

When is a good less elastic?

A
  • when the price is a small proportion of the total budget
  • good substitutes are not available
  • when a good is a necessity
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5
Q

What is the equation for point elasticity of demand? (2)

A

%ΔQ/%ΔP

ΔQ/ΔP x P/Q = 1/slope x P/Q

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6
Q

What is the midpoint formula for elasticity of demand?

A

(ΔQ/avgQ)/(ΔP/avgP)

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7
Q

When is D elastic and when is it inelastic?

A

Elastic at high prices

Inelastic at low prices

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8
Q

When is S elastic?

A

When inputs are in elastic supply

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9
Q

Total revenue equals

A

Price x Quantity

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10
Q

What is income elasticity equal to?

A

(ΔD/D)/(ΔY/Y)

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11
Q

What is income elasticity for a normal good?

A

it is more than zero

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12
Q

What is income elasticity for an inferior good?

A

it is less than zero

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13
Q

What is the formula for price elasticity of supply?

A

%ΔQs/%ΔP

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14
Q

What does it mean if price elasticity of supply is less than one?

A

suppliers are close to capacity, inputs are in inelastic supply

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15
Q

What is one possible explanation for price elasticity of demand increasing from 0.75 to 1.25?

A

the good has gone from being inelastic to being elastic due to the introduction of a new substitute

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16
Q

What is the formula for cross elasticity of demand?

A

%ΔQd/%ΔP

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17
Q

What is cross elasticity of demand for substitutes?

A

%ΔQd/%ΔP>0

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18
Q

What is cross elasticity of demand for complements?

A

%ΔQd/%ΔP<0

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19
Q

What is positive economics?

A

what things are/how they work

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20
Q

What is normative economics?

A

when called to recommend and suggest what ought to be

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21
Q

What is resource heterogeneity?

A

resources differ in their productive characteristics

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22
Q

How can opportunity cost be calculated on a PPF?

A

by the slope: ΔQg/ΔQs

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23
Q

When does marginal cost increase on a PPF?

A

as Qs increases

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24
Q

What is technically efficient on a PPF?

A

all resources are fully employed and being used in their most effective combinations

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25
Does trading shift the PPF?
no
26
Q (goods) = f(....
resources, technology, time, services
27
Assuming ceteris paribus, Q (goods) =
f(services)
28
A country has an absolute advantage if
it makes more of the good than another country does
29
A country has a comparative advantage if
its opportunity cost of making a good is lower
30
Where does the terms of trade fall?
between the two opportunity costs
31
Specialised labour and capital leads to what? Why is this?
economies of scale because as size increases, you can take advantage of specialised people and equipment
32
Points above the PPF are what?
unobtainable combinations
33
Points above the LRAC curve are what?
ineffient
34
Points below the PPF are what?
inefficient combinations
35
Points below the LRAC curve are what?
unobtainable
36
Where do small firms costs fall on the LRAC curve?
they are early on ie. high costs, small output
37
Where do large firms costs fall on the LRAC curve?
they are later on ie. low costs, high output
38
What seven things does quantity demanded depend on?
``` price of the good income price of compliments price of substitutes number of consumers tastes expectations of future prices ```
39
What are three reasons the demand curve slopes downwards?
substitution effect income effect/purchasing power Law of DMU
40
What is the horizontal interpretation of the demand curve?
it shows the quantity demanded at each price
41
What is the vertical interpretation of the demand curve?
it shows the quantity at increasing marginal utility
42
We buy things when MV is what?
MV > P
43
Suppliers produce things when what?
MC < P
44
What five things does quantity supplied depend on?
``` price of the good price of inputs number of suppliers in a relative market technology expectations of future prices ```
45
What is the vertical interpretation of the supply curve?
it shows the quantity at increasing marginal cost
46
What is the horizontal interpretation of the supply curve?
it shows the quantity supplied at each price
47
What is marginal cost equal to?
ΔTC/ΔQ
48
Why does the supply curve slope upwards?
due to the law of diminishing marginal returns
49
What is the law of diminishing marginal returns?
Additions of variable factors (L and K) yield progressively smaller increases in output
50
What does L stand for in the law of diminishing marginal returns?
variable inputs
51
What does K stand for in the law of diminishing marginal returns?
fixed inputs
52
If demand and supply both decrease, what happens to Qe and Pe?
Qe decreases but the change in Pe is indeterminate
53
If demand and supply both increase, what happens to Qe and Pe?
Qe increases but the change in Pe is indeterminate
54
If demand decreases and supply increases, what happens to Qe and Pe?
Pe decreases but the change in Qe is indeterminate
55
If demand increases and supply decreases, what happens to Qe and Pe?
Pe increases but the change in Qe is indeterminate
56
If NZ has a comparative advantage in the production of a good compared to the rest of the world, does NZ export or import?
export
57
If the rest of the world had a comparative advantage in producing a good compared to NZ, does NZ export or import?
imports
58
What are four inhibitors to efficient market function?
1. difficulty excluding access to scarce resources (MV < MC) 2. barriers to competition (MC > MV) 3. limited information about prices or product characteristics 4. macroeconomic instability
59
What is a private good?
easy to exclude, rival in consumption
60
What does it mean when a good is rival in consumption?
no one else gets to consume it
61
What does it means when a good is easy to exclude?
it is easy to stop others consuming it
62
What is a club good?
non-rival in consumption, easy to exclude

BSNS113 (14 decks)

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