# Shared Flashcard Set

## Details

Economics 201 Bashaw Final
bashaw final
26
Economics
12/12/2011

Term
 Quantity Demanded
Definition
 amount of a good that buyers are willing and able to purchase
Term
 Law of Demand
Definition
 as price rises, quantity demanded falls
Term
 Demand Curve
Definition
 a graph of the relationship between the price of a good and the quantity demanded
Term
 Reasons demand curve shifts
Definition
 Income, Prices of related goods, consumer tastes, expectations, number of buyers
Term
 Quantity supplied
Definition
 amount of a good that sellers are wiling and able to sell
Term
 Law of supply
Definition
 the quantity supplied of a good rises when price rises
Term
 Reasons supply curve shifts
Definition
 Input prices, technology, expectations, number of sellers in market
Term
 Supply and Demand equilibrium
Definition
 market price has reached a level where quantity supplied equals quantity demanded
Term
 Surplus
Definition
 situation in which quantity supplied is greater than quantity demanded
Term
 Shortage
Definition
 situation where quantity demanded is greater than quantity supplied
Term
 Three Steps to Analyzing Equilibrium Changes
Definition
 1. Decide whether event shifts supply, demand or both2. Decide which direction the curve shifts3. Compare the changes
Term
 Price Elasticity of Demand
Definition
 measure of how much a quantity demanded responds to a change in price
Term
 PE of D formula
Definition
 %change in demand / %change in price
Term
 Determines PE of D
Definition
 availability of close substitutes, neccessities vs. luxeries, definition of the market, time horizon
Term
 PE of D formula (Midpoint Method)
Definition
 {[(Q2-Q1)/((Q2-Q1)/2))]/[(P2-P1)/((P2-P1)/2))]}
Term
 Perfectly elastic market
Definition
 Elasticity equals infinity (flat line)
Term
 Perfectly inelastic market
Definition
 Elasticity equals 0 (verticle line)
Term
 Elastic demand and total revenue
Definition
 price and total revenue are indirectly proportional (Inelastic or Elastic)
Term
 Inelastic demand and total revenue
Definition
 price and total revenue are directly proportional (Inelastic or Elastic)
Term
 Price ceiling
Definition
 cap on prices
Term
 Price floor
Definition
 minimum on prices
Term
 Opportunity cost
Definition
 what one must give up to get something
Term
 Value of marginal product
Definition
 Profit x marginal product of workers
Term
 compensating differentials
Definition
 certain jobs earn more money because of these reasons...
Term
 derived demand
Definition
 demand for workers is derived from the products they produce
Term
 profit-maximizing hiring rule
Definition
 hire workers until the VMP = wage
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