# Shared Flashcard Set

## Details

Chapter 4-6
Test Flashcards
48
Economics
02/08/2013

Term
 Demand
Definition
 All the quantities that consumers are willing and able to buy at different prices in a period of times.
Term
 Law of Demand
Definition
 - When price rises, quantity demanded falls• Ceteris Paribus- When price Falls, Quantity demanded rises.
Term
 Diminishing marginal utility
Definition
 satisfied less and less with each additional purchase.a. Ex. Starving boy eats one slice of pizza at a time….
Term
 Consumer tastes/preferences demand determinant
Definition
 1. Income2. Tastes/Preferences3. Consumer Expectations4. Market Size/ # Buyers5. Complementary Goods6. Substitute Goods
Term
 Market size (# buyers) demand determinant
Definition
 If # of buyers increases, then the Demand IncreasesIf # of Buyers decreases, then the Demand Decreases
Term
 Income demand determinant (normal & inferior)
Definition
 Normal Goods:When income rises, demand increasesWhen income falls, demand decreasesInferior Good:When income rises, demand decreasesWhen Income falls, Demand increases
Term
 Related goods demand determinant (subs & comps)
Definition
 PB & J:If Price of one rises, demand for the other decreasesIf price of one falls, the demand for the other increasesCoke and Pepsi: If price of one rises, demand for other increases. If price of on falls, demand for other decreases.
Term
 Consumer expectations demand determinant
Definition
 If future price is expected to rise, current, demand increases.If the future price is expected to fall, current demand decreases.
Term
 Difference between demand & quantity demanded
Definition
 quantity is directly effected by the price while regular is effected by factors listed.
Term
 Elasticity of demand (definition & formulas)
Definition
 a. Responsiveness by consumersb. It measures the % change in quantity demanded that results from a % change in price
Term
 Difference between elastic and inelastic
Definition
 if there is little/no response to price change PED is said to be inelastic… If there’s a large response to price change, PED is said to be elastic.
Term
 Perfectly elastic demand (def., graph, infinite)
Definition
 infinite increases
Term
 Relatively elastic demand (def., graph, >1)
Definition
 gradual decrease in price and increase in quantity
Term
 Perfectly inelastic demand (def., graph, = 0)
Definition
Term
 Relatively inelastic demand (def., graph, <1 but >0)
Definition
Term
 Unit elastic (definition)
Definition
 any change in price, whether big or small, triggers exactly the same percentage change in quantity.
Term
 Total revenue test
Definition
 • Total revenue is the amount of money received by the seller• It is equal to the price of the good X the quantity soldo TR = P X Q
Term
 Elastic Factors (5)
Definition
 i. Number of substituteii. Luxury of necessityiii. Narrowness of definitioniv. Timev. Proportion of income spent
Term
 Supply
Definition
 All the quantities that producers are willing and able to provide at different prices in a period of time.
Term
 Law of Supply
Definition
 As prices fall…quantity supplied fallsAs prices rise… quantity supplied rises….*A Direct Relationship*
Term
 Input cost supply determinant
Definition
 1. Input Costs2. Labor Productivity3. Technology4. Government Action5. Producer Expectations6. Number of Producers
Term
 Government action supply determinant
Definition
 a. If taxes increase, supply decreases (excise taxes)b. With a subsidy (reverse tax), supply increases
Term
 Technology supply determinant
Definition
 a. Technology increases supply
Term
 Labor Productivity supply determinant
Definition
 a. Increasing productivity increases supply
Term
 # Producers supply determinant
Definition
 a. # of sellers rise, supply increasesb. # of sellers fall, supply decreases
Term
 Producer expectations supply determinant
Definition
 a. If the future price is expected to fall, increase current supplyb. If the future price is expected to rise, decrease current supply
Term
 Difference between supply & quantity supplied
Definition
 quantity is directly effected by the price while regular is effected by factors listed.
Term
 Market Equilibrium
Definition
 when quantity demand and supply are equal
Term
 Surplus (excess supply)
Definition
 too much supply, not enough demand
Term
 Shortage (Excess demand)
Definition
 not enough supply, too much demand.
Term
 Price Floor (def, graph, examples)
Definition
 Minimum legal, price helps producers…ex. Agriculture)
Term
 Minimum Wage (def, graph, effects of)
Definition
 Increases floor of wage and increases unemployment....
Term
 Price ceiling (def, graph, examples)
Definition
 Max Legal Price, helps consumer… ex. Rent controls, WWII)
Term
 Rationing
Definition
 o During WWII, Gov. dealt with shortage with rationing system
Term
 Black Market
Definition
 Selling a product at an illegal price• Good intentions with bad consequences
Term
 What happens to eq p/q if demand increases?
Definition
 shift to right…. Equilibrium Price Increases and Equilibrium Quantity Increases
Term
 What happens to eq p/q if demand decreases?
Definition
 Equilibrium Price Decreases and Equilibrium Quantity Decreases
Term
 What happens to eq p/q if supply increases?
Definition
 Eq. P Decreases and Eq. Q Increases
Term
 What happens to eq p/q if supply decreases?
Definition
 Eq. P Increases and Eq. Q Decreases
Term
 Positive statements/Economics
Definition
 A way of describing and explaining economics as it is
Term
 Normative Statements/Economics
Definition
 A way of describing and explaining what economics behavior ought to be, not what it actually is.
Term
 Scarcity
Definition
 a situation that exists when there are not enough resources to meet human wants.
Term
 Economics
Definition
 the study of how individuals and societies satisfy their unlimited wants with limited resources.
Term
 Resources/Factors of Production
Definition
 the economic resources needed to produce goods and services
Term
 Opportunity Cost
Definition
 the value of something that is given up by choosing one alternative over another
Term
 Production Possibilities Curve
Definition
 a graph used to illustrate the impact of scarcity on an economy
Term
 Public Good
Definition
 Goods and services that are provided by the government and consumed by the public as a group.
Term
 Externality (+ and -)
Definition
 Negative: an externality that is a negative effect, or cost, for people who were not involved in the original economic activity. (2nd hand smoking)Positive: people aren't involved but they benefit from it. (Neighbor has a beautiful garden/yard)
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