Unit 2A (Micro) Flashcards
(20 cards)
The law of demand
When the price goes down, the quantity demanded goes up
-The law of demand only applies to normal goods
Normal good
If income increases, then the quanitity demanded goes up
Inferiror good
Goods that if your income goes up, you buy less of the product
- Ramen noodles
- 1 ply toilet paper
- Generic brands
Determinants of demand
- Income (demand shifts right if income increases)
- Population (# of people elligible to buy the product)
- Tastes and preferences
- Subsitutes
- Compliments
- Expectations (gas prices going yo, will fill the tank more often)
- These things SHIFT the demand curve
- Changing the price is a shift ALONG the demand curve
The law of supply
If the price goes up, the quantity supplied goes up
Determinants of supply
- Cost of inputs
- technology
- size of industry (amount of producers)
- Price of related outputs (something else you can produce with the same ingredients as brownies, but the price of choco chip cookies is higher, so you make choco chip cookies)
- Expectations (If you know price will be higher in the future, not sell as much right now)
What type of product are price floors for and why are they implemented
- Wheat, corn, milk
- Farming is a volital industry at the whims of the whether. In the good years, the floor gives farmers a bit more money so they can make it through the bad years. Protects food supply and the consumers pay a higher price than the market should be at to protect the food supply
Price ceiling type of product and why they are used
- Rent controls and heating oil
- Essential products
- Meant to protect consumers
How do you tell the consumer and producer price with a qouta
Where the quota line intersects the demand curve is the consumer price
Where the quota line intersect the supply curve is the supply curve
WHEN USING A TABLE
Ex; the quota is 5000
1. FInd where the quantity supplied is 5000. AT that amount, that is the producer price
2. Find where the quantity demanded is at 5000. At that amount, that is the consumer price
Say you are at a pub where the number of girls is about twice as the number of guys. In this pub the costs for a guy of talking to a girl are relatively…
low
Which of the following is most likely to increase consumer surplus in the market for cotton t-shirts?
A. The price of polyester t-shirts falls
b. the price of industrial sewing machines used to produce garments increases
c. Consumer incomes fall and cotton t-shirts are normal goods
d. weather conditions provide for an extremely productive cotton harvest
Weather conditions provide for an extremely productive harvest
Consider the market for milkshakes. An increase in the consumer surplus may result from
an increase in the supply of milkshakes
Consider the market for Britney Spear’s music. A DECREASE in consumer surplus may result from:
a. an increase in the supply of brittney spear’s music
b. an increase in the price of katy perry music (a complement)
c. a decrease in the price of britney speas music
d. a britney spears’ a critical input for her music goes missing
D
Apple will introduce its cloud service in the fall. If this service INCREASES the costs of selling music then we would expect an ____ in the ___ surplus in the market for commercial music
B
If the US government imposes a quota on the amount of French wine allowed into the US (The quota is set at a quantity below equilibrium), the price of French wine in the US will ___ while the US produced wine will ___
E
If steak and potatoes are complements, when the price of steak goes up, the demand for potatoes
B
An increase in supply is caused by
An increase in the price of the good
Producers may supply a good with an inefficiently low quality if the government imposes an
Price control
Suppose that a binding price floor is in place in a particular market. If the market is deregulated and the price floor is removed, then which of the following effects could occur
There would be a decrease in the quality of goods supplied
The market for salmon is in equilibrium. A price ceiling, a price floor, and a quota limit in this market would all have what outcome in common
Inefficiencies created by a quantity exchanged that is less than the equilibrium quantity
