Term
What is Demand? What is the law of demand?
Why does it exist? |
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Definition
Demand is the desire to own and pay for something. P goes up. D goes down. P goes down. D goes up Because people are cheap skates |
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Term
| How do the income and substitution effects work? |
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Definition
As income goes up, or down, consumption changes Substitution usually shows people saving money. |
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Term
| Why is the demand curve downward sloping? |
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Definition
| Because of the law of demand. |
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Term
| What does an economist mean by ceteris paribus? |
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Definition
| All things stay constant, except for price. |
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Term
| How does a change in quantity demanded differ from a change in demand? |
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Definition
Change in quantity demanded means price was the shifter. Change in demand means that anything other than price was the reason of its shift. |
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Term
| List the various shifters of demand. |
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Definition
1. Income effect 2. Consumer expectations 3. Population 4. Tastes and Advertisements 5. Substitutes 6. Complements |
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Term
| If your demand for a good is inelastic, what will happen if its price changes? |
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Definition
| It doesnt matter, people still need the items. |
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Term
| If your demand for a good is elastic, what will happen if its price changes? |
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Definition
| Change in demand will either go up or go down. |
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Term
| What is the value of an inelastic good? An elastic one? A unitary elastic one? |
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Definition
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Term
| List the various factors that affect elasticity of demand. |
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Definition
1. substitutbility 2. Budget constraints 3. necessity vs. luxury 4. habit formation 5. time |
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Term
| What is the formula for price elasticity of demand? |
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Definition
elasticity of demand : percentage change in QD / Percentage change in Price |
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Term
| What is the formula for total revenue? |
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Definition
| Total revenue: Price x Quantity sold |
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Term
| If demand is elastic and firm raises its prices, what may happen to total revenue? |
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Definition
Decrease quantity sold decreases |
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Term
| If demand is elastic and firm lowers its prices, what may happen to total revenue? |
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Definition
| It will rise b/c quantity sold goes down |
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Term
| If demand is inelastic and a firm raises its prices, what may happen to total revenue? |
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Definition
| higher revenue becasue increase prices makes up for low price |
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Term
| If demand is inelastic and firm lowers its prices, what may happen to total revenue? |
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Definition
| lower revenue because increase in Quantity but decrease in price |
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Term
What is supply? Law of suppy? Why does it exist? |
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Definition
amount of good availible As price goes up, supply goes up. Price goes down, supply goes down. it exists because firms want to make more profit (an incentive) |
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Term
| What two movements account for the law of supply? |
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Definition
existing firms make more and new firms establish because they want to be a part of all the action |
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Term
| List the shifters of supply |
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Definition
1. Input costs -land -labor -capital 2. Government -subsidy -tax -regulation 3. Global Economy 4. Future expectations 5. Number of suppliers |
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Term
| Why would a firm choose to locate close to its inputs? |
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Definition
| When raw materials are expensive to transport |
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Term
| Why would a firm choose to locate cloe to its consumers? |
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Definition
| When output is more costly to transfer |
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Term
Why would a firm choose to locate in a diverse city?
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Definition
there are a variety of workers and businesses in the urban areas |
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Term
| What happens at equlibrium? |
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Definition
There is no shortage There is not surplus Everything is equal. *QD = QS* |
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Term
| How do you find equilibrium price and equilibrium quantity? |
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Definition
Its the point where the two lines intersect and the sloped up = supply sloped down = demand |
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Term
| What kind of prices cause excess demand? Why? What will happen to such prices? |
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Definition
low prices because more people will buy it will rise |
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Term
What kind of prices cause excess supply? Why? What will happen to such prices?
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Definition
| high prices becasue more buyers will want a profit. and it will eventually have to decrease |
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Term
| What two methods of price control does the government use? |
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Definition
Price floors and Price ceilings |
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Term
| Why does the government set price ceilings? |
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Definition
| to make it more affordable for buyers |
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Term
| give an example of a price ceiling |
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Definition
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Term
| Why does a government set a price floor? |
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Definition
| It serves as an incentive for sellers to make a profit |
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Term
| Give an example of a price floor. |
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Definition
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Term
| What do prices do in the free market? |
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Definition
| to make sure its resources go to who plan to make the best use of them. |
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Term
| what two things does the market system ensure? |
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Definition
1. resources are allocated efficiently 2. resources used wisely |
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Term
| To whom do resources go to and why? |
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Definition
highest bidder because the highest bidder becomes a firm or to the highest bidder because they value it most |
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Term
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Definition
| DESIRE TO OWN SOMETHING AND ABILITY TO PAY |
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Term
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Definition
| CONSUMERS BUY MORE OF A GOOD WHEN ITS PRICE IS LOW AND LESS OF A GOOD WHEN ITS PRICE IS HIGH |
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Term
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Definition
| WHEN CONSUMERS REACT TO AN INCREASE IN A GOOD'S PRICE BY CONSUMING LESS OF THAT AND MORE OF ANOTHER |
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Term
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Definition
| THE CHANGE IN CONSUMPTIONS FROM A CHANGE IN REAL INCOME |
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Term
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Definition
| ALL OTHER THINGS HELD CONSTANT BUT PRICE |
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Term
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Definition
| TWO GOODS THAT ARE BOUGHT AND USED TOGETHER |
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Term
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Definition
| GOODS USED IN PLACE OF ANOTHER |
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Term
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Definition
| DESCRIBES A DEMAND THAT IS VERY SENSITIVE TO A CHANGE IN PRICE |
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Term
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Definition
| DESCRIBES DEMAND THAT IS NOT SENSITIVE TO A CHANGE IN PRICE |
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Term
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Definition
| TOTAL AMOUNT OF MONEY A FIRM RECEIVES BY SELLING GOODS AND SERVICES |
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Term
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Definition
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Term
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Definition
| TENDENCY OF SUPPLIERS TO OFFER MORE OF A GOOD AT A HIGHER PRICE |
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Term
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Definition
| THE AMOUNT A SUPPLIER IS WILLING AND ABLE TO SUPPLY AT A CERTAIN PRICE |
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Term
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Definition
| A GOVERNMENT PAYMENT THAT SUPPORTS A BUSINESS OR MARKET |
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Term
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Definition
| GOVERNMENT INTERVENTION IN A MARKTET HAT AFFECTS THE PRODUCT OF A GOOD |
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Term
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Definition
| POINT AT WHICH QUANTITY DEMANDED AND QUANITY SUPPLIED ARE EQUAL |
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Term
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Definition
| ANY PRICE OF QUANTITY NOT AT EQULIBRIUM |
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Term
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Definition
| MAXIMUM PRICE THAT CAN BE LEGALLY CHARGED FOR A GOOD OR SERVICE |
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Term
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Definition
| A MINIMUM PRICE FOR A GOOD OR SERVICE |
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Term
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Definition
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Term
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Definition
| A MINIMUM PRICE THAT AN EMPLOYER CAN PRAY A WORKER FOR AN HOUR OF LABOR |
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Term
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Definition
| QUANTITY SUPPLIED IS GREATER THAN QUANTITY DEMANDED (EXCESS SUPPLY) |
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Term
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Definition
QUANITY DEMANDED IS GREATER THAN QUANITY SUPPLIED (EXCESS DEMAND) |
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Term
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Definition
| A SUDDEN SHORTAGE OF A GOOD |
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Term
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Definition
| MARKET IN WHICH GOODS ARE SOLD ILLEGALLY |
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