Unit 2 Study Guide

Question 1

Causes for changes in Quantity Demanded?

Answer 1

Price

Question 2

Causes for changes in Demand?

Answer 2

Consumer income
Consumer tastes
Price of related goods
Expectations
Population
Technology

Question 3

Determinants of Demand Elasticity

Answer 3

Availability of substitutes
If it is a need or want
Portion of income spent on it

Question 4

Examples of Elastic demand

Answer 4

Gas from particular station
Coffee

Question 5

Examples of Inelastic Demand

Answer 5

Gas in general
Insulin
Service of medical Doctors

Question 6

Relationship between Marginal Utility and Demand.

Answer 6

The more good a consumer consumes, the less they are willing to pay because each additional unit decreases satisfaction.

Question 7

Relationship between Price and Quantity Demanded.

Answer 7

As the price of a good increases, the quantity demanded decreases, which is called Law of Demand

Question 8

Causes for changes in Supply?

Answer 8

Cost of resources
productivity
Technology
Taxes
Subsidies
Government regulations
Number of sellers
Expectations

Question 9

Cause of Change in Quantity Supplied?

Answer 9

Price

Question 10

4 Costs that affect a Business’s decisions?

Answer 10

Fixed
Variable
Total
Marginal

Question 11

Variable Costs

Answer 11

Costs that varies like labor, energy, and raw materials

Question 12

Fixed Costs

Answer 12

Costs that do not change like rent.

Question 13

Why is the Production Function important?

Answer 13

It illustrates the changes of one variable in a brief period or in the short run

Question 14

What are the stages of production?

Answer 14

Increasing, decreasing, and negative returns.

Question 15

What is the difference between a Supply Curve and a Demand Curve?

Answer 15

A Supply curve shows the quantity sellers are willing to sell at different price, and the curve slopes upwards. A Demand Curve Shows the quantity consumers are willing to buy at different prices, and the curve slopes downwards.

Question 16

Complements

Answer 16

Product that increases the use of other products; products related in such a way that an increase in the price of one reduces the demand for both.

Question 17

Demand

Answer 17

A combination of quantities that someone would be willing and able to buy over a range of possible prices at a given moment.

Question 18

Elastic

Answer 18

A change in an independent (price) variable results in a larger change in the dependent variable (quantity demanded decreases which or supplied)

Question 19

Inelastic

Answer 19

Change in the independent variable causes a less than proportionate change in the dependent variable.

Question 20

Law of Demand

Answer 20

Rule stating that more will be demanded at lower prices and less at higher prices

Question 21

Marginal Utility

Answer 21

Additional satisfaction or usefulness obtained from acquiring or consuming one more unit of a product.

Question 22

Microeconomics

Answer 22

Branch of economic theory that deals with behavior and decision making by small units. Such as individuals and firms.

Question 23

Substitutes

Answer 23

Competing products that can be used in place of one another; products related in such a way that an increase in the price of one increases the demand for the other.

Question 24

Unit Elastic

Answer 24

Change in the independent variable generates a proportionate change of the dependent variable.

Question 25

Break-Even Point

Answer 25

Total cost equals total revenue

Question 26

Diminishing Returns

Answer 26

Stage of production where output increase at a decreasing rate as more units of variable input are added.

Question 27

Increasing Returns

Answer 27

Stage of production where output increase at an Increasing rate as more units of variable input are added.

Question 28

Law of Supply

Answer 28

Principle that more will be offered for sale at higher prices than at lower prices.

Question 29

Marginal Product

Answer 29

Extra output due to the addition of one more unit of input.

Question 30

Negative Return

Answer 30

Stage of production where output is decreasing as more units of input are added

Question 31

Production Function

Answer 31

Graphic portrayal showing how a change in the amount of a single variable input affects total output.

Question 32

Supply

Answer 32

Amount of a product a producer or seller would be willing to offer for sale at all possible prices in a market at a given point in time.