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Definition
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| What is the definition of demand? |
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Definition
| The quantity demanded of a good is the amount of the product a consumer would buy at a given price. |
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| What does a Demand Curve show? |
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Definition
| A demand curve shows the relationship between a good's price and the quantity demanded |
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| What is the "Law of Demand?" |
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Definition
| The law of demand is an economic law that states that consumers buy more of a good when its price decreases and less when its price increases. |
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| If income goes UP and demand also goes UP, what type of good are we discussing? |
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Definition
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| If income goes UP and demand goes DOWN, what type of good are we discussing? |
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Definition
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| If you only change price you usually [blank] the curve. |
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Definition
| You usually move along the curve (it does not usually shift the curve) |
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| This demand curve shift represents a normal good |
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| This demand curve shift represents an inferior good |
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| If demand for a good increases when a related good's price goes up, what do we call that related good? |
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Definition
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| If demand for a good decreases when a related good's price goes UP, what do we call that related good? |
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Definition
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| True or False: A change in quantity demanded and a change in demand have the same affect on the demand curve? |
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Definition
| False: A change in quantity demanded usually moves a point along the demand curve, while a change in demand shifts the demand curve. |
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| True or False: A decrease in the price of a complement will increase demand |
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Definition
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| True or False: A decrease in the price of a substitute will decrease demand. |
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Definition
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| The [blank] is the amount of a product a firm is willing to sell at a given price. |
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Definition
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| If the cost of an input decreases, does the Supply Curve shift inwards (left) or outwards (right)? |
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Definition
| The supply curve shifts outwards as represented by this graph: [image] |
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| Say a new regulation decreases efficiency, and therefore leads to higher costs, which way will the supply curve shift? |
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Definition
| Higher costs will cause the supply curve to shift to the left. |
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| As more firms enter the industry [in theory], prices will go [blank] while the Supply Curve shifts [blank] |
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Definition
| Prices will go down and the supply curve shifts right (outwards) |
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Definition
| It is the point at which quantity demanded and quantity supplied are equal. |
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Term
What is represented by the equation Qd > Qs and the red part of the graph below?
[image] |
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Definition
| The area in red is a shortage. |
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What is represented by the equation Qs > Qd and the red area in the graph below?
[image] |
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Definition
| The equation given and the red area of the graph represent a Surplus |
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| Excess demand is also known as what? |
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Definition
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| Excess supply is also known as what? |
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Definition
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| What happens to the demand curve of Pepsi if the price of Coca Cola (a substitute) increases? |
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Definition
| The demand curve will shift outwards (to the right). |
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| What happens to the demand curve for monitors if the price of computers increases (complements) |
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Definition
| The demand curve will shift inwards (to the left) |
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Term
In the graph below, what is the term for the area shaded in red?
[image] |
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Definition
| Consumer Surplus is represented by the red area. |
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Term
In the graph below, what is the term for the areas shaded in blue?
[image] |
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Definition
| The area shaded in blue is called the producer surplus |
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Term
Assume a consumer goes out shopping for a CD player and he or she is willing to spend $250. When this individual finds that the player is on sale for $150, economists would say that this person has a [blank] of $100.
Source: investopedia.com |
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Say a producer is willing to sell a widget at $5 and consumers are willing to purchase these widgets for $8 per widget. The $3 difference is called a [blank]
Source: investopedia.com |
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Definition
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| The area below the demand curve and above the price paid is called a [blank]. |
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Definition
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Say a producer supplies less than the market demands due to a price ceiling as represented by the graph below:
[image]
What is the term for the area shaded in green (aka: consumers who would have more marginal benefit than marginal cost who are not buying the product, or consumers who would have more marginal cost than marginal benefit who are buying the product.)? |
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Definition
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The following equation represents what?
[image] |
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Definition
| Price elasticity of demand |
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The following equation represents what?
[image] |
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Definition
| Price elasticity of demand |
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| If demand is very responsive to price changes, its elasticity is said to be what? |
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Definition
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If demand is not very responsive to price changes, its elasticity is said to be what?
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Definition
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Term
The following equation represents what?
Q = a - b * P |
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Definition
| Elasticity for linear demand curves |
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Does the following equation represent elastic or inelastic demand?
[image] |
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Definition
| The equation [image]represents elastic demand |
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Does the following equation represent elastic or inelastic demand?
[image] |
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Definition
| The equation [image]represents inelastic demand |
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What does the following equation represent?
[image] |
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Definition
| The equation [image] represents Income elasticity of demand |
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| If a good's income elasticity of demand is less than zero, what type of good can this be considered? |
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Definition
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| If a good's income elasticity of demand is greater than zero, what type of good can we consider it? |
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Definition
| If Ei > 0, the good is a normal good |
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| If a good's income elasticity of demand is greater than 1, the good can be considered what? |
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Definition
| If Ei > 1, it can be considered a luxury good |
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| During a period of increasing income, demand for luxury products tends to [blank] at a higher rate than the demand for necessities. |
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Definition
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| With regards to consumer preferences, the symbol > means what? |
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Definition
| "Is strictly preferred to" |
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With regards to consumer preferences, the symbol ~ means what?
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Definition
| "is equally preferred to" |
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| With regards to consumer preferences, what is the symbol for "preferred equally to" |
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Definition
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| The symbol [image] stands for what, with regards to consumer preferences |
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Definition
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| What are the 3 assumptions made about consumer's preferences? |
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Definition
1) Completeness
2) Transitivity
3) More is better than less (non-satiation) |
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| What does the "completeness assumption" mean in consumer preferences? |
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Definition
Completeness: consumers can always compare and rank all possible bundles, and determine which ones are more preferable than others and which they are indifferent between.
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What does the "transitive assumption" mean in consumer preferences?
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Definition
Transitivity: if A is preferred to B, and B is preferred to C, then A is preferred to C as well.
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What does the "non-satiation assumption" mean in consumer preferences?
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Definition
Non-satiation: given a choice of two bundles that are identical in composition, you will always take the larger basket.
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If X is preferred to Y, and Y is indifferent to Z, what would the answer look like?
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| Define indifference curve |
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Definition
| An Indifference Curve is a set of bundles that all give the consumer the same level of satisfaction. |
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What does the following graph represent?
[image] |
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Definition
| Indifference curves for perfect complements X and Y. |
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What does the following indifference curve represent?
[image] |
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Definition
| Indifference curves where Goods X and Y are perfect substitutes. |
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| For any two bundles, A & B, on the same indifference curve, A __ B? |
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Definition
| A ~ B (A is preferred equally to B) |
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| Why are indifference curves negatively sloped? |
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Definition
| As quantity consumed of one good (X) increases, total satisfaction would increase if not offset by a decrease in the quantity consumed of the other good (Y) |
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Term
| The negative slope of the indifference curve reflects the law of: |
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Definition
| Diminishing Marginal Utility |
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| What does the law of diminishing marginal utility state? |
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Definition
| The law of diminishing marginal utility states that as more of a good is consumed, total utility increases at a decreasing rate - (additions to utility per unit consumption are successively smaller). |
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| The slope (absolute value) of the indifference curve is also known as what? |
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Definition
| Marginal Rate of Substitution (MRS) |
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| If two goods are perfect complements then the indifference curves will be what shape? |
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Definition
| If two goods are perfect complements then the indifference curves will be L-shaped. |
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| The marginal rate of substitution is zero or infinite for what type of goods? |
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Definition
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| If two people are trading, gains from trading can only occur when MRS [_____] |
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Definition
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Term
All firms maximize profit by setting __________ equal to ________.
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Definition
| Marginal revenue; Marginal cost |
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| A ___________ statement is a statement about what is and that contains no indication of approval or disapproval. |
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Definition
| A positive statement is a statement about what is. |
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| A ________ statement expresses a judgment about whether a situation is desirable or undesirable. |
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Definition
| A normative statement expresses a judgement. |
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