THEME 1 Flashcards
What are the 4 functions of money?
Medium of exchange= Can be used to purchase goods and services so money can be traded for products.
Measure of Value= Money can be used to compare the value of two items so it allows for a comparison.
Store of Value= Keeps its value and can be used later on.
Method of deferred payement =Can be used to pay off debt.
What is diminishing marginal utility?
As more of an additional unit of a good or service is consumed the less overall additional utility will be gained from each extra unit as it will eventually decline.
Why is the demand curve downward sloping?
Income effect= At higher prices consumers are not able to purchase a product so overall quantity demanded is low as seen by the demand curve.
Subsitution effect=At a low price consumer are willing and able to purchase a good or services because other products (subsitutes) are more expensive.
What is an indirect tax?
An indirect tax is an additional cost on producers on each unit of a good or service. This tax can be often passed down to consumers.
What is a specific tax?
Its a fixed value tax per unit of a good or service, so does not change with the value of good.
What is an ad valorem tax?
A percentage tax on each unit of a good or service like VAT tax which can change depending on price.
