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| Economics is best defined as |
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Definition
| making choices with unlimited wants but facing a scarcity of resources |
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| When an economy produces more houses and fewer typewriters, this deals with the question of |
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Definition
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| Marginal benefit from a good is the |
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Definition
| benefit from consuming one more unit of a good. |
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| In marginal benefit, when you consume one more unit of a good, the benefit _________ as consumption ___________. |
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Definition
benefit decreases
consumption increases |
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Term
| Which event causes a movement along but not a shift of the supply curve for spinach? |
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Definition
| A rise in the price of spinach. |
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Term
| Which events cause a shift in the supply curve, and not a movement along it? |
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Definition
| Increase in labor wages, great weather that produces more spinach, or bad weather that produces less. |
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Term
| The price elasticity of demand equals magnitude of the percentage change in the _______ divided by the percentage change in the ______. |
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Definition
| percentage change in the quantity demanded divided by the percentage change in the price |
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Term
| Our inability to satisfy all our wants is called |
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Definition
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Term
| A reward that encourages an action or a penalty that discourages an action |
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Definition
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Term
| The social science that studies the choices that individuals, businesses, governments, and societies as they deal with scarcity and the incentives that influence and reconcile those choices. |
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Definition
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Term
| The two types of economics and their differences. |
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Definition
Micro- the study of choices INDIVIDUALS make, the ways those choices interact in markets, and the influence in governments.
Macro- the study of the performance of the national and the global economies. |
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Term
| "Why are people buying more e-books and fewer hard copy books?" is an example of a ____-economic question. |
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Definition
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| "Why is the unemployment rate in the United States so high?" is an example of a ______-economic question. |
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Definition
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Term
| What are the two big economic questions and what do they ask? |
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Definition
HOW do choices end up determining what, how, and for whom goods and services get produced?
WHEN do choices made in the pursuit of self-interest also promote the social interest? |
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Term
| The objects people value and produce to satisfy human wants. |
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Definition
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| Agriculture accounts for less than __ percent of total U.S. production, manufactured goods for ___ percent, and services for ___ 77 percent. |
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Definition
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| In China, agriculture accounts for ___ percent of total production, manufactured goods for ___ percent and services for ____. |
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Definition
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Term
| Goods and services are produced by using productive resources economists call what? |
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Definition
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Term
| What are the four categories of the factors of production? |
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Definition
| Land, Labor, Capital, Entrepreneurship |
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Term
| The factors of production are a part of what big question? |
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Definition
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| The gifts of nature that we use to produce goods and services are |
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Definition
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Term
| The work time and work effort that people devote to producing goods and services is |
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Definition
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| the quality of labor depends on ___________, which is the knowledge and skill that people obtain from education, on the job training, and work experience. |
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Definition
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| The tools, instruments, machines, buildings, and other constructions that businesses use to produce goods and services are |
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| The human resource that organizes land, labor, and capital is |
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| _____ gets the goods and services depends on the incomes people earn. |
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Definition
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Term
| Making choices that you think are best for you. |
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Definition
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Term
| Choices that are best for society as a whole are said to be in the |
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Definition
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| What are the two dimensions of social interest? |
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Definition
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| Resource use is ________ if it is not possible to make someone better off without making someone else worse off. |
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Definition
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Definition
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Term
| Self interest and social interest are a part of what big question? |
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Definition
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Term
| What are four topics that generate discussion that illustrate tension between self and social interest? |
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Definition
| Globalization, the information monopolies, climate change, and economic instability |
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Term
| The expansion of international trade borrowing and lending and investment. |
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Definition
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Term
| The technological change of the past forty years has been called the _______ and applies to the self vs social issue of |
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Definition
Information revolution.
The information age monopolies |
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Term
| A self vs social interest issue coming from burning fossil fuels to generate power and putting CO2 into the atmosphere. |
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Definition
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| The self vs social interest issue resulting from financial stress and the financial choices of worlds banks, businesses, and people. |
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Definition
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Term
| What are the six key ideas that define the economic way of thinking? |
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Definition
| Tradeoff, rational choices, benefit, cost, the margin, and incentives |
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Term
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Definition
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| People make _____ by comparing benefits and costs. |
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Definition
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Term
| What you gain from something |
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Definition
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Term
| What you give up to get something |
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Definition
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| "How much" choices are made |
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Definition
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| What a person likes and dislikes and the intensity of those feelings |
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| The highest-valued alternative that must be given up to get it. |
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Definition
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Term
| The two components of opportunity cost are |
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Definition
| The money/good/service it costs and the time |
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Term
| The benefit from pursing an incremental increase in an activity is its |
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Definition
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| The opportunity cost of pursing an incremental increase in an activity is its |
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Definition
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Term
| If the marginal benefit from an incremental increase exceeds its marginal cost, your rational choice is to... |
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Definition
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Term
| A statement that can be tested by checking it against facts. |
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Definition
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| A statement that expresses an opinion and cannot be tested. |
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Definition
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Term
| What is the task of economic science? |
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Definition
| To discover positive statements that are consistent with what we observe that enable us to understand how the economic world works. |
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Term
| A __________ is a description of some aspect of the economic world that includes only those features that are needed for the purpose at hand. |
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| A graph that plots the value of one variable against the value of another variable for a number of different values of each variable. |
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| A relationship between two variables that move in opposite directions |
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Definition
| negative or inverse relationship |
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| A relationship between two variables that move in the same direction |
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Definition
| positive or direct relationship |
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| A relationship shown bu a straight line |
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| change in y / change in x |
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| If all other things relevant things remain the same. |
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Term
| The boundary between those combos of goods and services that can be produced and those that cannot. |
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Definition
| Production possibilities frontier (PPF) |
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Term
| To illustrate PPF we focus on two goods at a times and treat others as a constant. This means we are looking at it |
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Definition
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Term
| All points inside the PPF or on the frontier (line) are |
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Definition
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| Points outside the PPF are |
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Definition
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| What we achieve if we cannot produce more of one good without producing less of some other good. |
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Definition
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| Points on the frontier are |
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Definition
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| Any point inside the PPF frontier that are not ON the frontier are |
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Definition
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| Every choice along the PPF involves a |
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Definition
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| Moving down along the PPF means an ______ in the good on the X axis and a _________ in the good on the Y axis. |
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Definition
increase on X
decrease on Y |
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Term
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Definition
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Term
| The cost of producing one more unit of a service or good |
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Definition
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Term
| As we move along the PPF (down), the opportunity cost of the X axis good ___________ |
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Definition
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Term
| The benefit received from consuming one more unit of a good or service |
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Definition
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Term
| How do we measure marginal benefit? |
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Definition
| By the amount a person is willing to pay for an additional unit of a good or service |
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Term
| The more we have of any good, the _______ is it's marginal benefit and the ______ we are willing to pay for an additional unit of it. This is the principle of decreasing __________ |
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Definition
smaller
less
marginal benefit |
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Term
| The relationship between the marginal benefit of a good and the quantity of the good consumed. |
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Definition
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Term
| When we cannot produce more of any one good without giving up some other good, we have achieved |
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Definition
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Term
| When we cannot produce more of any one good without giving up some other good that we value more highly we have reached _____________. |
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Definition
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Term
| The point of ___________ is the point on the PPF at which marginal benefit equals marginal cost. |
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Definition
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Term
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Definition
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Term
| The expansion of production possibilities — an increase in the standard of living — is called |
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Definition
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Term
| The two key factors of economic growth are |
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Definition
| Technological change and capital accumulation |
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Term
| The development of new goods and of better ways of producing goods and services |
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Definition
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Term
| the growth of capital resources which includes human capital |
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Definition
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Term
| What is the opportunity cost of economic growth? |
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Definition
| Less current consumption and resources going toward research and development which can decrease production of consumption |
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Term
| A person can have a _________ in an activity if that person can perform the activity at a lower opportunity cost than anyone else. |
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Definition
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Term
| A person has an __________ if that person is more productive than others |
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Definition
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Term
| What are the four complimentary social institutions that make trade work? |
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Definition
| Firms, markets, property rights, money |
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Term
| An economic unity that hires factors of production and organizes those factors to produce and sell goods and services. |
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Definition
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Term
| Any arrangement that enables buyers and sellers to get information and do business with each other. |
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Definition
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Term
| the social arrangements that cover ownership, use, and disposal of resources, goods, or services. |
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Definition
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Term
| Any commodity or token that is generally acceptable as a means of payment |
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Definition
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Term
| Any arrangement that enables buyers and sellers to get information and do business with each other. |
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Definition
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Term
| A market that has many buyers and many sellers so no single buyer or seller can influence the price |
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Definition
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Term
| the amount of money needed to buy something |
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Definition
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Term
| the ratio of a goods money price to the money price of the next best alternative good is its opportunity cost |
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Definition
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Term
| If you demand something then what three rules apply |
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Definition
| You want it, can afford it, and have a definite plan to buy it |
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Term
| This states other things remaining the same, the higher price of a good, the smaller the quantity demanded and the lower the price of a good, the larger is the quantity demanded. |
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Definition
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Term
| According to the law of demand, the higher the price of a good the _______ in the quantity of demand. |
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Definition
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Term
| According to the law of demand, the lower the price of a good, the ________ is the quantity demanded. |
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Definition
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Term
| What two effects change the quantity demanded when the price changes? |
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Definition
| Substitution effect and Income effect |
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Term
| The relative price (opportunity cost) of a good or service rises, causing people to seek replacement items for it, so the quantity demanded of the good decreases. |
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Definition
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Term
| Substitution causes the quantity demanded of a good to |
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Definition
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Term
| When the price of a good or service rises relative to income, people cannot afford all things they bought, so the quantity demanded of the good _____________ |
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Definition
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Term
| The entire relationship between the price of the good and the quantity demanded of the good. |
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Definition
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Term
| This shows the relationship between the quantity demanded of a good and its price when all other influences on consumers planned purchases remain the same. |
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Definition
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Term
| For a demand curve, a rise in the price causes a __________ in the quantity demanded and a movement ____________ along the demand curve. |
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Definition
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Term
| For a demand curve, a fall in the price causes a ________ in the quantity demanded and a movement ________ along the demand curve. |
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Definition
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Term
| The graph that shows a willingness and ability to pay. |
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Definition
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Term
| Willingness to pay measures |
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Definition
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Term
| The smaller the quantity available for a demand curve, the ___________ is the price that someone is willing to pay for another unit. |
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Definition
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Term
| When some influence on buying plans other than the price of the goods change, there is a ___________ for that good. |
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Definition
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Term
| When demand ________ the demand curve moves right |
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Definition
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Term
| When demand ____________ the demand curve moves left |
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Definition
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Term
| What are the six main factors that change demand? |
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Definition
| Prices of related goods, expected future prices, income, expected future income, population, preferences |
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Term
| A good that can be used in place of another good. |
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Definition
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Term
| A good that is used in conjunction with another good |
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Definition
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Term
| When the price of the substitute rises or the price of the complement falls, the demand for the original product |
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Definition
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Term
| If the price of a good is expected to rise in the future current demand for the good __________ and the demand curve _____________. |
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Definition
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Term
| When income increases, consumers buy ____________ of most goods and the demand curve _____________. |
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Definition
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Term
| A good for which demand increases as income increases |
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Definition
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Term
| A good for which demand decreases as income increases |
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Definition
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Term
| When income is expected to increase in the future or when credit is easy to obtain, the demand may ____________ now. |
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Definition
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Term
| The larger the population, the _________ is the demand for all goods. |
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Definition
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Term
| People with the same income can have different demands if they have different |
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Definition
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Term
| When the price of a good changes but other things remain the same, the quantity demanded changes. What moves? |
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Definition
| The point along the demand curve |
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Term
| The point on the demand curve will move up if there is a __________ in price and _______ in quantity demanded |
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Definition
| increase in price, decrease in quantity demanded |
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Term
| The point on the demand curve will move down if there is a __________ in price and _______ in quantity demanded |
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Definition
| decrease in price, increase in quantity demanded |
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Term
| If the price remains the same but one of the other influences on buyers plans changes, demand changes. What happens to or on the demand curve? |
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Definition
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Term
What happens to the demand graph if there is an increase in quantity demanded?
What happens if there is an increase in demand? |
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Definition
increase quantity demanded moves point down line.
increase in demand, demand curve shifts right. |
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Term
What happens to the demand graph if there is a decrease in quantity demanded?
What happens if there is an increase in demand? |
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Definition
decrease quantity demanded moves point up the line.
decrease in demand, demand curve shifts left. |
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Term
| If a firm supplies a good or service then the firm has/can do what three things? |
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Definition
| has resources to produce, can profit from producing, has a definite plan to produce and sell |
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Term
| These determine what it is POSSIBLE to produce. |
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Definition
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Term
| Supply reflects decision about which feasible items TO produce. |
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Definition
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Term
| The amount that producers plan to sell during a given time period at a particular price. |
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Definition
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Term
| The entire relationship between the quantity supplied and the price of a good. |
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Definition
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Term
| this shows the relationship between the quantity supplied of a good and its price when all other influences on producers' planned sales remain the same. |
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Definition
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Term
| A rise in the price, other things remaining the same, brings an increase in _________ . |
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Definition
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Term
| A supply curve is a also called a |
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Definition
| minimum-supply-price curve |
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Term
| On a supply curve, as the quantity produced increases, marginal cost __________. |
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Definition
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Term
| On a supply curve, the lowest price at which someone is willing to sell and additional unit __________. |
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Definition
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Term
| The lowest price on a supply curve is the |
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Definition
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Term
| When some influence on selling plans other than the price of the good changes, there is a ____________ of that good. |
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Definition
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Term
| The quantity of the good that producers plan to sell changes at each and every price, so at every price there is a new ____________. |
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Definition
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Term
| When supply __________, the supply curve shifts right. |
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Definition
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Term
| When supply ______________, the supply curve shifts left. |
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Definition
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Term
| What are the six main factors that change supply of a good? |
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Definition
| The prices of factors of production, The prices of related goods of produced, expected future prices, the number of suppliers, technology, and the state of nature |
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Term
| If the price of a factor of production used to produce a good rises, the minimum price that a supplier is willing to accept for producing each quantity of that good _________. |
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Definition
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Term
| A rise in the price of a factor of production_________ supply and shifts the supply curve leftward. |
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Definition
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Term
| A ____________ in production for a good is another good that can be produced using the same resources. |
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Definition
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Term
| The supply of a good ________ if the price of a substitute in production falls. |
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Definition
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Term
| Goods are _______________ if they must be produced together |
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Definition
| complements in production |
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Term
| The supply of a good _________ if the price of a complement in production rises. |
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Definition
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Term
| If the price of a good is expected to rise in the future, supply of the god today _________ and the supply curve _________. |
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Definition
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Term
| The larger the number of suppliers of a good, the __________ is the supply of the good. An increase in the number of suppliers shifts the supply curve ____________ |
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Definition
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Term
| Advances in technology create new products which _________ the cost of producing existing products. |
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Definition
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Term
| advances in technology ________ supply and shift the supply curve _________. |
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Definition
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Term
| The state of nature includes what? |
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Definition
| All the natural forces that influence production, i.e. weather |
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Term
| A natural disaster _______ supply and shifts the supply curve _________. |
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Definition
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Term
| An advance in technology ________ the supply of a product and does what to the supply curve? |
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Definition
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Term
| When the price of a good changes and other influences on sellers plans remain the same, the quantity supplies changes and there is movement _____ the supply curve. |
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Definition
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Term
| When there is an increase in quantity supplied, what movement happens with the supply curve? |
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Definition
| the point on it moves up and right |
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Term
| When there is a decrease in the quantity supplied, what movement happens with the supply curve? |
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Definition
| the point on it moves down and left |
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Term
| If the price remains the same but other influence on sellers plans changes, supply changes. What does this do on a supply graph? |
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Definition
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Term
An increase in the quantity supplied on a supply curve does what?
An increase in the supply on a supply curve does what? |
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Definition
Moves the point on the line up and right
Moves the curve right |
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Term
A decrease in the quantity supplied on a supply curve does what?
A decrease in the supply on a supply curve does what? |
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Definition
Moves the point on the line down and left
Moves the curve left |
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Term
| A situation in which opposing forces balance each other. In a market this occurs when the price balances the plans of buyers and sellers. |
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Definition
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Term
| The price at which the quantity demanded equals the quantity supplied. |
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Definition
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Term
| The quantity bought and sold at the equilibrium price |
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Definition
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Term
| ______ regulates buying and selling plans. |
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Definition
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Term
| ______ adjusts when plans don't match. |
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Definition
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Term
| Supply curve and demand curve go in ________ directions. |
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Definition
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Term
| The point where the supply curve and demand curve meet is the |
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Definition
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Term
| If the quantity supplied exceeds the quantity demanded, there is a |
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Definition
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Term
| If the quantity demanded exceeds the quantity supplied, there is a |
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Definition
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Term
| If the quantity supplied equals the quantity demanded, |
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Definition
| there is no shortage or surplus of bars. |
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Term
| At prices above the equilibrium price, a __________ forces prices down. |
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Definition
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Term
| At prices below the equilibrium, a __________ forces the prices up. |
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Definition
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Term
| A shortage of product does what to prices? |
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Definition
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Term
| A surplus of a product does what to prices? |
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Definition
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Term
| When a supply curve stays the same and a demand curve shifts right (demand increases), at the original equilibrium price there is now a _________. The price ________ and the quantity supplied _________ along the supply curve. |
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Definition
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Term
| When supply increases and the supply curve shifts right, and the demand curve stays the same, at the original equilibrium price there is now a ___________. The price _____ and the quantity demanded _______ along the demand curve. |
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Definition
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Term
| When demand increases, and supply stays the same equilibrium price ______ and the equilibrium quantity ________. |
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Definition
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Term
| When demand decreases, and supply stays the same the equilibrium price ________ and the equilibrium quantity __________. |
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Definition
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Term
| When supply increases and demand stays the same the equilibrium price ______ and the equilibrium quantity ________ |
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Definition
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Term
| When supply decreases and demand stays the same the equilibrium price _______ and the equilibrium quantity ________ |
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Definition
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Term
| An increase in demand and an increase in supply ________ the equilibrium quantity |
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Definition
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Term
| The change in equilibrium price is ________ when both demand and supply increase, because the increase in demand raises the equilibrium price and the increase in supply lowers it |
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Definition
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Term
| A decrease in both demand and supply ____________ the equilibrium quantity. |
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Definition
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Term
| The change in equilibrium price is ______ when both demand and supply decrease because demand lowers the equilibrium price and the supply decrease raises it. |
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Definition
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Term
| A decrease in demand and increase in supply __________ the equilibrium price. |
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Definition
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Term
| A decrease in demand and increase in supply makes the equilibrium quantity ___________ because the decrease in demand decreases it and the rise in supply increases it |
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Definition
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Term
| An increase in demand and a decrease in supply ___________ the equilibrium price. |
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Definition
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Term
| The change in equilibrium quantity is __________ because the increase in demand increases the equilibrium quantity and the decrease in supply increases it. |
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Definition
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Term
| To measure responsiveness we use |
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Definition
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Term
| The ___________ is a unit-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same. |
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Definition
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Term
| The price elasticity of demand is calculated with what formula? |
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Definition
| % change in quantity demanded / % change in the price |
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Term
| To calculate the price elasticity of demand we express the change in price as a percentage of the ___________ |
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Definition
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Term
| We express the change in the quantity demanded as a % change of the ______________. |
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Definition
| average quantity demanded |
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Term
| The percentage change in quantity demanded, %(delta)Q, is calculated how? |
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Definition
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Term
| The percentage change in price, %(delta)P is calculated how? |
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Definition
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Term
| The price elasticity of demand equation simplified is |
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Definition
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Term
| By using the average price and average quantity, we get ________ elasticity value regardless of whether the price rise or falls. |
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Definition
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Term
| Elasticity is a ___________, so a change in the units of measurement of price or quantity leaves the elasticity value the same. |
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Definition
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Term
| The price elasticity formula yields a negative value why? |
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Definition
| because price and quantity move in opposite directions. |
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Term
| If the quantity demanded doesn't change when the price changes the price of demand is ________ and the good has a __________ demand. |
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Definition
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Term
| What does the demand curve of a perfectly inelastic graph look like? |
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Definition
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Term
| If the percentage change in the quantity demanded equals the percent change in price, the price elasticity of demand is _______ and the good has a ____________ demand. |
|
Definition
|
|
Term
| If the percentage change in the quantity demanded is smaller than the percentage change in price, the price elasticity of demand is _________ and the good has a __________ demand. |
|
Definition
less than one
inelastic demand |
|
|
Term
| If the percentage change in the quantity demanded is _________ than the percentage change in price the price elasticity of demand is __________ and the good has a __________ demand. |
|
Definition
|
|
Term
| If the percentage changes in quantity demanded is infinitely larger when the price barely changes the price elasticity of demand is ________ and the good has a __________ demand. |
|
Definition
infinite
perfectly elastic |
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|
Term
| What does a graph with a perfectly elastic demand look like? |
|
Definition
|
|
Term
| The elasticity of demand for a good depends on what three things? |
|
Definition
| The closeness of substitutes, the proportion of income spent on the good, and the time elapsed since a price change |
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|
Term
| The closeness the substitutes for a good or service, the ________ elastic is the demand for the good or service. |
|
Definition
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|
Term
| Necessities, such as food or housing, generally have _________ demand. |
|
Definition
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|
Term
| Luxuries, such as exotic vacations, generally have |
|
Definition
|
|
Term
| The greater the proportion of income consumers spend on the good, the _______ is the elasticity of demand for that good. |
|
Definition
|
|
Term
| The more time consumers have to adjust to a price change or the longer that a good can be stored without losing its value, the ______ elastic is the demand for that good. |
|
Definition
|
|
Term
| At the midpoint of a price elasticity of demand line, demand is |
|
Definition
|
|
Term
| Points above the midpoint of the demand curve line (price elasticity of demand line) are |
|
Definition
|
|
Term
| Points below the midpoint of the demand curve line (price elasticity of demand line) |
|
Definition
|
|
Term
| The _________ form the sale of a good or service equals the price of the good multiplied by the quantity sold. |
|
Definition
|
|
Term
| Total revenue changes when the ________ changes, but a rise in this doesn't always ________ total revenue |
|
Definition
|
|
Term
| The change in total revenue due to a change in price depends on what? |
|
Definition
| the elasticity of demand? |
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|
Term
| If demand is ________ a 1 percent price cut increases the quantity sold by more than 1 percent and total revenue _________. |
|
Definition
|
|
Term
| If demand is _________ a 1 percent price cut increases the quantity sold by less than 1 percent and total revenue __________. |
|
Definition
|
|
Term
| If demand is _________ a 1 percent price cut increases the quantity sold by 1 percent and total revenue remains unchanged. |
|
Definition
|
|
Term
| A method of estimating the price elasticity of demand by observing change in total revenue that results from a price change (when all other things remain the same). |
|
Definition
|
|
Term
| If a price cut increases total revenue, demand is |
|
Definition
|
|
Term
| If a price cut decreases total revenue, demand is |
|
Definition
|
|
Term
| If a price cut leaves total revenue unchanged, demand is |
|
Definition
|
|
Term
| What does a price elasticity of demand graph look like? |
|
Definition
|
|
Term
| What is the highest point on a price elasticity of demand graph? |
|
Definition
| The maximum total revenue |
|
|
Term
| If your demand is ____________, a 1% price cut increases the quantity you buy by more than 1% and your expenditure on the item __________. |
|
Definition
|
|
Term
| If your demand is __________ a 1% price cut increases the quantity you by by less than 1% and your expenditure on the item _________. |
|
Definition
|
|
Term
| If your demand is _________ a 1% price cut increases the quantity you buy by 1% and your expenditure |
|
Definition
unit elastic
does not change |
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|
Term
| The _______________ measures how the quantity demanded of a good responds to a change in income, other things remaining the same. |
|
Definition
| income elasticity of demand |
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|
Term
| The formula for calculating the income elasticity of demand is |
|
Definition
| percentage change in quantity demanded / percentage change in income |
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|
Term
| If the income elasticity of demand is greater than 1, demand is ______________ and the good is a __________. |
|
Definition
income elastic
normal good |
|
|
Term
| If the income elasticity of demand is greater than zero but less than 1, demand is _________ and the good is a _________. |
|
Definition
income inelastic
normal good |
|
|
Term
| If the income elasticity of demand is less than zero (negative) the good is an ___________ |
|
Definition
|
|
Term
| The __________ measures the responsiveness of demand for a good to a change in the price of a substitute or a compliment, other things remaining the same. |
|
Definition
| cross elasticity of demand |
|
|
Term
| The formula for calculating the cross elasticity is |
|
Definition
| percentage change in quantity demanded/percentage change in price of substitute or complement |
|
|
Term
| The cross elasticity of demand for a ___________ is positive. |
|
Definition
|
|
Term
| The cross elasticity of demand for a __________ is negative. |
|
Definition
|
|
Term
| A shift right for a quantity demanded curve represents what in cross elasticity? What type of cross elasticity is this? |
|
Definition
Price of a substitute rises
Positive |
|
|
Term
| A shift left for a quantity demanded curve represents what in cross elasticity? |
|
Definition
The price of a complement rising.
Negative |
|
|
Term
| The responsiveness of the quantity supplied of a good to a change in its price. |
|
Definition
|
|
Term
| The __________ measures the responsiveness of the quantity supplied to a change in the price of a good, when all other influences on selling plans remain the same. |
|
Definition
|
|
Term
| Formula for elasticity of supply |
|
Definition
| percentage change in quantity supplied / percentage change in price |
|
|
Term
| Supply is ____________ if the supply curve is vertical and the elasticity of supply is 0. |
|
Definition
|
|
Term
| Supply is _____________ if the supply curve is linear and passes through the origin (note slope doesn't matter). |
|
Definition
|
|
Term
| Supply is __________ if the supply curve is horizontal and the elasticity of supply is infinite. |
|
Definition
|
|
Term
| The elasticity of supply depends on what two things? |
|
Definition
| Resource substitution possibilities and time frame for supply decision |
|
|
Term
| The easier it is to substitute among the resources used to produce a good or service, the _________ is its elasticity of supply. |
|
Definition
|
|
Term
| The more time that passes after a price change, the __________ is the elasticity of supply |
|
Definition
|
|
Term
| Momentary supply is ___________ |
|
Definition
|
|
Term
| Short run supply is ____________ |
|
Definition
|
|
Term
| Scare resources might be allocated by what 8 things? |
|
Definition
| Market price, command, majority rule, contest, first come first serve, lottery, personal characteristics, force |
|
|
Term
| When a market allocates a scare resource the people who get the resource are those |
|
Definition
| who are willing to pay the market price |
|
|
Term
| Most of the scare resources that you supply get allocated by what? |
|
Definition
|
|
Term
| You sell your labor services in a _________ and you buy most of what you consume in a _____________. |
|
Definition
|
|
Term
| ___________ allocates resources by order (command) of someone in authority. |
|
Definition
|
|
Term
| __________ allocates resources in the way the majority of voters choose. This is how some societies make decisions for big decisions. For example, voting on tax rates. |
|
Definition
|
|
Term
| __________ allocates resources to a winner (or group of winners). The most obvious of these are sporting events but they occur in other arenas such as the Oscars. |
|
Definition
|
|
Term
| ______________ allocates resources to those who are first in line. IE Restaurants. |
|
Definition
|
|
Term
| ___________ allocate resources to those with the winning number who draw the lucky cars or who came up lucky on some other gaming system. IE a casino or getting airport slots |
|
Definition
|
|
Term
| ____________ allocate resources to those with the "right" characteristics. IE choosing a marriage partner, who gets admission into school, etc. |
|
Definition
|
|
Term
| This plays a role in allocating resources. IE war, theft, etc. |
|
Definition
|
|
Term
| _____ is what we get, ______ is what we pay. |
|
Definition
|
|
Term
| The value of one more unit of a good or service is its _______. |
|
Definition
|
|
Term
| We measure value as the ________ that a person is willing to pay. |
|
Definition
|
|
Term
|
Definition
|
|
Term
| A demand curve is a ___________ curve. |
|
Definition
|
|
Term
| The relationship between the price of a good and the quantity demanded by one person is called |
|
Definition
|
|
Term
| The relationship between the price of a good and the quantity demanded by all buyers in the market is called |
|
Definition
|
|
Term
| The ___________ is the horizontal sum of the individual demand curve. |
|
Definition
|
|
Term
| The excess of the benefit received from a good over the amount paid for it. |
|
Definition
|
|
Term
| We can calculate consumer surplus as the ___________ (or value) of a good minus its __________ summed over the quantity bought. |
|
Definition
|
|
Term
| What is the area under the demand curve and above paid price up to the quantity bought? |
|
Definition
|
|
Term
| Firms are businesses to make |
|
Definition
|
|
Term
| To make a profit, firms must sell their output for a price that ________ the cost of production. |
|
Definition
|
|
Term
| Firms distinguish between ______ and ______. |
|
Definition
|
|
Term
| ________ is what the producer gives up, ______ is what the producer receives. |
|
Definition
|
|
Term
| The cost of one more unit of a good or service is its |
|
Definition
|
|
Term
| Marginal cost in the _______ that a firm is willing to accept. |
|
Definition
|
|
Term
| The minimum supply price determines |
|
Definition
|
|
Term
|
Definition
|
|
Term
| The relationship between the price of a good and the quantity supplied by one producer is called |
|
Definition
|
|
Term
| The relationship between the price of a good and the quantity supplied by all producers in the market is called |
|
Definition
|
|
Term
| The excess amount received from the sale of a good over the cost of producing it. |
|
Definition
|
|
Term
| We calculate producer surplus as the _______ received for a good minus the _______ (marginal cost) summer over the quantity sold. |
|
Definition
price
minimum supply price |
|
|
Term
| Producer surplus is show by the area ________ the market price and _________ the supply curve summed over the quantity sold. |
|
Definition
|
|
Term
| A competitive market creates an ____________ of resources at equilibrium. |
|
Definition
|
|
Term
| The quantity demanded equals the quantity supplied at |
|
Definition
|
|
Term
|
Definition
| less than the equilibrium quantity |
|
|
Term
|
Definition
| greater than the equilibrium quantity |
|
|
Term
|
Definition
|
|
Term
| Resources are used efficiently when ________ |
|
Definition
| marginal social benefit equals marginal social cost |
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
| When the efficient quantity is produce, total surplus (the consumer and producer surplus together) is |
|
Definition
|
|
Term
| What did Adam Smith's invisible hand idea in the Wealth of Nations imply? |
|
Definition
| competitive markets send resources to their highest valued use in society, consumers and producers pursue self interest, and market transactions generate an efficient use of resources |
|
|
Term
| _________ arises when a market delivers an inefficient outcome. |
|
Definition
|
|
Term
| Why does market failure occur? |
|
Definition
| Underproduction of an item or overproduction of an item |
|
|
Term
| A _________ equals the decrease in total surplus. |
|
Definition
|
|
Term
| Deadweight loss is a _________ loss. |
|
Definition
|
|
Term
| Name the 6 sources of market failure. |
|
Definition
| Price and quantity regulations, taxes and subsidies, externalities, public goods and common resources, monopoly, high transactions costs. |
|
|
Term
| _________ sometimes put a block on the price adjustments and lead to underproduction. |
|
Definition
|
|
Term
| __________ that limit the amount that a farm is permitted to produce also lead to underproduction. |
|
Definition
|
|
Term
| _________ increase the prices paid by buyers and lower the prices received by sellers. |
|
Definition
|
|
Term
| So taxes decrease the quantity produced and lead to ___________ |
|
Definition
|
|
Term
| ___________ lower the prices paid by buyers and increase the pricers received by sellers. |
|
Definition
|
|
Term
| _________ increase the quantity produce and lead to overproduction |
|
Definition
|
|
Term
| A cost or benefit that affects someone other than the seller of buyer of a good. |
|
Definition
|
|
Term
| An electric utility creates an ________ by burn in coal that creates acid rain. The utility doesn't consider this cost when it chooses the quantity of power to produce. ___________ results. |
|
Definition
external cost
overproduction |
|
|
Term
| What is the result of an external benefit? |
|
Definition
|
|
Term
| Something that benefits everyone and no one can be excluded from its benefits. |
|
Definition
|
|
Term
| It's in everyones self interest to avoid paying for a public good (the free rider problem) which leads to |
|
Definition
|
|
Term
| A __________ is owned by no one but can be used by everyone. |
|
Definition
|
|
Term
| It is in everyones self interest to ignore the costs of their own use of common resource that falls on others. This is called the |
|
Definition
|
|
Term
| The tragedy of the commons leads to |
|
Definition
|
|
Term
| A firm that is the sole provider of a good or service |
|
Definition
|
|
Term
| The self interest of a monopoly is to max profit, therefore it does what? |
|
Definition
| sets a price to achieve this goal |
|
|
Term
| A result of monopolies is they |
|
Definition
| produce too little- underproduction |
|
|
Term
| _____________ are the opportunity cost of making trades in a market. |
|
Definition
|
|
Term
| To use the market price as the allocator of scarce resources, it must be ________________ of establishing a market. |
|
Definition
| worth bearing the opportunity cost |
|
|
Term
| When transactions cost high, the market may |
|
Definition
|
|
Term
| What are the 2 ideas about fairness? |
|
Definition
| the result isn't fair or the rules aren't fair |
|
|
Term
| The idea that only equality brings efficiency is |
|
Definition
|
|
Term
| The principle that states we should strive to achieve "the greatest happiness for the greatest number" |
|
Definition
|
|
Term
| The idea that only equality brings efficiency is |
|
Definition
|
|
Term
| The principle that states we should strive to achieve "the greatest happiness for the greatest number" |
|
Definition
|
|
Term
| Utilitarianism believes If everyone gets the same marginal utility from a given amount of income and if the marginal benefit of income decreases as income increases, then |
|
Definition
| taking a dollar from the richer person and giving it to a poorer person increases the total benefit. Even distribution means greatest happiness. |
|
|
Term
| What does utilitarianism ignore? |
|
Definition
| the cost of making income transfers |
|
|
Term
| Recognizing the costs of making income transfers leads to the __________ between efficiency and fairness. |
|
Definition
|
|
Term
| Rules not being fair is not fair is based on the |
|
Definition
|
|
Term
| The ____________ is the requirement that people in the similar situations be treated similarly. |
|
Definition
|
|
Term
| Symmetry principle means ___________ not equality of income |
|
Definition
|
|
Term
| Economics is best defined as |
|
Definition
| making choices with unlimited wants but facing scarcity of resources |
|
|
Term
| When an economy produces more houses and fewer gas pipelines it is answering the ______ question. |
|
Definition
|
|
Term
| What are the four categories into which factors of production are grouped? |
|
Definition
| Land, entrepreneurship, capital, and labor |
|
|
Term
| You want a job, you get three offers. You want the middle paying job but accept the highest paying. What is the opportunity cost of accepting it? |
|
Definition
| The money you would have been paid in the middle of the job |
|
|
Term
| A student studies 2 hours a day for a test and is debating studying an hour extra. The marginal benefit |
|
Definition
| in the increase in the grade since he studied |
|
|
Term
| The statement unemployment should be kept at below 6 percent is |
|
Definition
| A normative statement because it is an opinion that can't be tested |
|
|
Term
| ABC produced 1 new drama in a season and gives up the chance to produce 3 reality shows. This means opportunity cost of of a new reality show is |
|
Definition
| 1/3 of a new drama series. |
|
|
Term
| Marginal benefit from a good is the benefit from consuming one more unit of a good and that benefit _________ as consumption increases |
|
Definition
|
|
Term
| John can make 20 loaves or 20 cakes while Joe can make 30 loaves or 15 cakes. The gains from trade will be maximized if John produces _________ and Joe ________. |
|
Definition
John only cakes
Joe only loaves of bread |
|
|
Term
| A country is using resources to produce bread and water but marginal benefit from bread exceed marginal cost. To achieve allocative efficiency the country must |
|
Definition
| Produce more bread and less water |
|
|
Term
| In 2011, 2,000 grills were demanded for $500 per grill. In 2012, 250,000 grills were demanded for same price. What could have cause the increase? |
|
Definition
| The increase could be the result of anything except an increase in the supply of gas grills. Is is a possible result of an income increase if they are normal good, an increase in population, natural gas price falling. |
|
|
Term
| Which event shifts the supply curve of gas right? |
|
Definition
| a decrease in the price of a resource used to produce it such as crude oil |
|
|
Term
| Which creates a movement along but not a shift of the supply curve for spinach? |
|
Definition
| An increase or decrease in price of spinach |
|
|
Term
| When the price is below the equilibrium price the quantity demanded |
|
Definition
| exceeds the equilibrium quantity but the quantity supplied is less than the equilibrium quantity |
|
|
Term
| During the past 20 years the prices of prescription drug relative to the price of other goods has risen yet Americans buy more than ever. This outcome maybe because |
|
Definition
| with higher incomes and older americans, the demand curve for prescription drugs shifted rightward |
|
|
Term
| Walmart is booming in economic hard times because many of the goods that it sells |
|
Definition
|
|
Term
| The price elasticity of demand equals the magnitude of the |
|
Definition
| percentage change in the quantity demanded divided by the percentage change in the price |
|
|
Term
| Las Oc due to an early frost pumpkin increased by 10% since last year. As a result quantity demanded decreased from 2 mil to 1.5 mill. Based on this statement, the |
|
Definition
| demand for pumpkins is elastic |
|
|
Term
| In 2008, cocoa beans increased in price in more the 40%. In response, rogue chocolatier increased the price of its chocolate by 20%. Rogue says the quantity of its bars sold decreased by 15%. The price elasticity of demand for chocolate is |
|
Definition
|
|
Term
| Netflix is the largest online DVD rental service offering flat rate rental by mail and online to houses. If they increase their average flat rate by 10% and its total rev increases, then demand for Netflix means |
|
Definition
|
|
Term
| The income elasticity of demand is defined as the % change in |
|
Definition
| The quantity demanded divided by the % change in income |
|
|
Term
| The cross elasticity of demand is calculated as the % change in the |
|
Definition
| quantity demanded of one good divided by the % change in the price of another good. |
|
|
Term
| Suppose when price of oil is 60$ per barrel the quantity supplied is 70 million barrels a day, but when price is 40$ per barrel the quantity of oil supplied is 69 mill barrels a day |
|
Definition
| The supply for oil is inelastic |
|
|
Term
| When the market price is the method of allocating resources |
|
Definition
| everyone who is willing and able to pray for a good gets one |
|
|
Term
| Marginal benefit from a good reflects |
|
Definition
| the maximum willingness to pay for another unit of it |
|
|
Term
| Consumer surplus from a good is the ___________. Summer over the quantity bought. |
|
Definition
| The excess of the value of the good to the consumer over the price the consumer paid for it. |
|
|
Term
| Marginal cost of producing a good is |
|
Definition
| equal to the opportunity cost of producing one more unit of the good. |
|
|
Term
| The producer surplus on a unit of a good is the |
|
Definition
| excess of the price received from the sale of the good over the marginal cost of producing the good. |
|
|
Term
| The competitive market is efficient because the marginal social benefit form the good |
|
Definition
| equals the marginal social cost of producing the good |
|
|
Term
| In every market the production is efficient if there is no |
|
Definition
|
|
Term
|
Definition
| a loss to the entire society |
|
|
