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Economics > Unit 2 > Flashcards

Unit 2 Flashcards

1
Q

Demand

A

the desire willingness and ability to buy a product

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1
Q

Law of Demand

A

quantity demand of a good or service varies inversely with its price

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2
Q

Demand Schedule

A

its a table
a listing that shows the various quantities demanded of a particular product at all prices that might prevail in the market at a given time

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3
Q

Demand curve

A

its a graph
a graph showing the quantity demanded at each and every price that might prevail in the market

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4
Q

Change in Quantity Demanded

A

a movement along the demand curve that shows a change in quantity of the product purchased in response to a change in price

we move on the curve not a new curve

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5
Q

a. Change in demand

b. has ____ factors

A

a. new curve/line
b. 6

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6
Q

Substitution effect and ex.
Change in demand

A

the demand for a product increases if the price of the replacement goes up and vice versa
ex. butter is more expensive the demand for margarine goes up

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7
Q

Consumer income
Change in demand

A

increase in income means people can buy more stuff - > shifts right a loss in income shifts left (decrease in demand)

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8
Q

Consumer tastes
Change in demand

A

advertising, newsreports, fashion trends, introduction of new products time and change in season can effect consumer taste

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9
Q

Complements and ex.
Change in demand

A

the use of one good increases the use of another
ex. video games and playstation 5

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10
Q

Change in expectations and ex.
Change in demand

A

the way people think about the future
ex. if you think gas prices are going up tomorrow your going to buy it today -> demand is up today

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11
Q

Number of consumers and ex.
Change in demand

A

change in number of consumers in a firms market
ex. your the only ice cream shop in the area and a park opens by you
-> demand goes up

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12
Q

Supply
what direction is the line/curve?

A

amount of a product that would be offered for sale at all possible prices that could prevail in the market
direction is like a normal graph

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13
Q

Law of Supply

A

the principle that supplies will normally offer more for sale at high prices and less lower prices

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14
Q

Change in supply
has ____ causes

A

an increase or decrease in the amount of a product supplied at each and every price
new line
7

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15
Q

Change in quantity supplied

A

results in a change in the price of the product with factors other then price held constant
movement along line (no new line)

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16
Q

Cost of input
change in supply

A

a decrease in cost of input such as labor and packaging allows producers to produce more of the product at every price

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17
Q

Productivity
Change in supply

A

the supply curve can go right or left in relation to the workers productivity. if the workers are more motivated or work more efficiently productivity will increase causing more products to be produced

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18
Q

Technology
Change in supply

A

When a new machine of chemical is invented to lower cost of production, producers will make more product

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19
Q

Taxes and Subsidies
Change in supply

A

If the producers inventory if taxed or if fees are paid to receive a license to produce the cost of production increases causing the curve to shift

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20
Q

Government Regulations
Change in supply

A

when the gov establishes new regulations the cost of production can be affected causing a change in supply

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21
Q

Number of Sellers
Change in supply

A

as more firms enter the industry the supply curve shifts to the right, in other words the larger number of suppliers the greater the market supply

22
Q

Expectations
Change in supply

A

If producers think the price of their product will go up they may withhold some of the supply thus causing a left shift

23
Q

Equilibrium price

A

the price that brings out an equality between the quantity demanded and the quantity supplied

24
Q

Rationing

A

dividing up or allocating the scarce items among those who want them

25
Q

How it changes demand, supply, and equilibrium on a graph:
Demand shift left

A

Demand: shifts in new line, lower quantity demanded at each price
Supply: same line, lower quantity
Equilibrium: lower p & q

26
Q

How it changes demand, supply, and equilibrium on a graph:
Demand shifts right

A

Demand: new line shifts out, higher quantity demanded at each price
Supply: same line, higher quantity supplied
Equilibrium: Higher p & q

27
Q

How it changes demand, supply, and equilibrium on a graph:
Supply shifts right

A

Demand: same curve, higher quantity demanded
Supply: new line, more quantity supplied at each price
Equilibrium: Lower P and Higher Q

28
Q

How it changes demand, supply, and equilibrium on a graph:
Supply Shifts left

A

Demand: same curve, higher quantity demanded
Supply: new line, shifts out/more quantity supplied at each price
Equilibrium: Lower P Higher Q

29
Q

Price support/floor
ex.

A

a legally established price above the equilibrium price
ex. a minimum wage (wage cannot go below a certain price/number)

30
Q

Price ceiling
ex.

A

max prices that are established below the equilibrium price
ex. rent control (rent cannot go above a certain price)

31
Q

Excise tax
ex.

A

a tax is levied on specific products
ex. cigarettes

32
Q

Elasticity of demand

A

a measure of the responsiveness of the quantity demanded of a product to a change in its price

33
Q

Elastic
ex.

A

a given change in price causes a relatively larger change in quantity demanded
ex. demand for vegetables is more in summer because their cheaper

34
Q

Inelastic
ex.

A

A given change in price causes a relatively smaller change in quantity demanded
ex. table salt if it was a lot cheaper the demand would not change that much

35
Q

Unitary elastic

A

a change in price will be offset exactly by a proportional change in quantity demanded

36
Q

Elasticity coefficient table:
a. Perfectly Inelastic
b. Relatively Inelastic
c. Unitary Elastic
d. Relatively Elastic
e. Perfectly Elastic

A

a. = 0
b. <1
c. = 1
d. >1
e. oo

37
Q

Theory of Production

A

relationship between the factors of production and the output of goods and services

38
Q

Short run

A

period of production that allows producers to change only the amount of the variable input called labor

39
Q

Long run

A

period of production long enough for producers to adjust the quantities of all their resources, including capital

40
Q

Diminishing return

A

output increases at a diminishing rate as more units available input are added

41
Q

a. 3 Stages of production

A

a. based on the way marginal product changes as the variable input of labor is changed
Increasing return
Diminishing return
Negative return

42
Q

Supply Elasticity

A

a measure of the way in which quantity supplied responds to a change in price

43
Q

Fixed cost

A

cost that a business incurs even if the plant is idle and output = 0

44
Q

Overhead

A

total fixed cost

45
Q

Variable cost

A

cost that changes when the business rate of operation or output changes

46
Q

Total cost

A

sum of the fixed and variable costs

47
Q

Marginal cost

A

extra cost incurred when a business produces one additional unit of product

48
Q

Do you drop the negative with calculating elasticity or with equilibrium price?

A

drop it with elasticity keep when calculating equilibrium price

49
Q

Subsidy

A

a payment that government makes to private producers or consumers for each unit of output that they produce or purchase
meant to encourage support/production of certain products
ex. grains or housing

50
Q

a. Total revenue
b. Relationship with elasticity
ex.

A

a. the total receipts from the sale of its product
b. The elasticity of demand tells suppliers how their total revenue will change if their price changes. Total revenue = total quantity sold
x price of good.
ex. With elastic demand – a rise in price lowers total revenue TR increases as price falls.

51
Q

a. Normal good
b. Inferior good

A

a. an increase in income will cause consumers to purchase more of a product (a normal good) than before each possible price
b. an increase in income will cause consumers to purchase less of an inferior good, ex. generic mac n cheese
basically people buy better quality products when they have more money

52
Q

a. Shortage
b. Surplus

A

a. an excess quantity demanded over quantity supplied
b. an excess quantity supplied over quantity demanded

Economics (8 decks)

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