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BEC > 1.0 Economics Concept & Strategy > Flashcards

1.0 Economics Concept & Strategy Flashcards

1
Q

1.02 What is the equation for Price Elasticity of Demand?

A

Price Elasticity of Demand = % Change in Qty demanded / % Change in Price

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2
Q

1.02 Calculate the % change in quantity demanded

A

Change in QTY demanded / Avg QTY demanded

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3
Q

1.02 Calculate % change in Price

A

Change in price / AVG price

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4
Q

1.02 What is the concept of price elasticity?

A

It measures how responsive the quantity demanded (of a good/service) is to a change in price.

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5
Q

1.02 What does Cross-Elasticity of Demand measure?

A

-It measures the change in the quantity demanded of a good to a change in the price of ANOTHER good.

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6
Q

1.02 What is the relationship between goods that are subsitutes? (Cross-Elasticity)

A

Two different goods are substitutes if they result in a direct relationship ( + ).

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7
Q

1.02 What is the relatioship between goods that are complements? (Cross-Elasticitiy)

A

Two different goods are complements if they result in an inverse relationship ( - ).

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8
Q

1.03 What is the equation for Price Elasticity of Supply?

A

Price Elasticity of Demand = % Change in Qty Supplied / % Change in Price

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9
Q

1.03 What is the effect if governments impose a price-cieling below equilibrium?

A

Quantity Demanded will exceed Quantity Supplied.

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10
Q

1.03 What is a Price Ceiling?

A

Maximum Legal Price at which a product or service may be sold at.

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11
Q

1.03 What is a Price Floor?

A

The minimum legal price at which a product or service may be sold at.

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12
Q

1.03 What is the effect if goverments impose a price-floor above the equilibrium?

A

Quantity Supply will exceed Quantity Demanded.

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13
Q

1.05 What is the law of diminishing marginal utility?

A

The more a consumer consumes of a particular product, the less satisfying will be the next unit of that product.

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14
Q

1.05 What is the percentage of the next dollar of income that the consumer would be expected to spend?

A

Marginal Propensity to Consume (MPC)

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15
Q

1.05 What is Marginal Propensity to Save (MPS)?

A

The percentage of the next dollar that the consumer would be expected save.

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16
Q

1.06 Marginal Cost (MC)

A

The increase in cost that results from producing one extra unit.

17
Q

1.06 Marginal Revenue (MR)

A

The change in total revenue received by the addition of one more unit of output.

18
Q

1.06 Marginal Revenue Product

A

The increase in total revenue received by the addition of one additional unit of an input or resource (ex: one more worker)

19
Q

1.06 Returns to Scale

A

The increases in units producted (output) that result from increases in production costs.

20
Q

1.06 Percentage increase in output / Percentage increase in input

A

Returns to Scale

21
Q

1.06 Economies of Scale

A

Increased efficiencies from producing more units of a product. > 1

22
Q

1.06 What may contribute to Economies of Scale?

A

This may result from spreading fixed costs over larger number of units, being able to save on transaction and transportation costss by buying in larger quantities, having employees specialize in different tasks and improve their abilities, or automatic procedures that are performed repetitively.

23
Q

1.06 Diseconomies of Scale

A

Increased inefficiencies.

24
Q

1.06 Constant Returns to Scale

A

Range of output for which increases in the use of inputs yield proportionate increases in output.

25
Q

1.07 Which market structure is easy to enter and exit because each individual seller is too small to affect the overall market price?

A

Perfect (or Pure) Competition

26
Q

1.07 True or False. In a Perfect competition, the firm is a price taker.

A

True because the demand curve and prices are perfectly elastic.

27
Q

1.07 What are the (5) characteristics of a Perfect Competition industry?

A
  1. Large number of sellers
  2. Homogenous (largely identical) product
  3. No non-price competition (advertising)
  4. Easy entry/exit
  5. Perfectly elastic demand curve
28
Q

1.07 Define Pure Monopoly

A

When only one firm sells a product or service for which there are no close substitutes. (ex: cable company/drug companies)

29
Q

1.07 Define Monopolistic Competition

A

Large numbers of firms produce hetergogeneous products and engage in a great deal of non-price competition.

30
Q

1.07 Oligopoly

A

There are significant barriers to enter to ensure there are only a small number of firms. (Airlines)

31
Q

1.07 What are the (5) Characteristics of an Oligopoly?

A
  1. Small number of large sellers
  2. Barriers to entry (cost or patents)
  3. Non-price competition exists
  4. Rival actions are observed
  5. The firm’s demand curve is kinked
32
Q

1.08 What is product differentiation?

A

Developing a range of slightly different products that are more attractive to one’s target markets or simply to ensure that they differ substantially from competitor’s offerings.

33
Q

1.08 In what ways can products differ?

A
  1. Physical differences
  2. Perceived differences
  3. Customer support differences
34
Q

1.08 Define Cost Leadership Strategies

A

Concentrates on cutting the costs of producing, selling, and distrubuting a firm’s range of products.

35
Q

1.08 List 3 Cost Leadership Strategies

A
  1. Process Engineering
  2. Lean manufacturing
  3. Supply chain management
36
Q

1.09 Capitalism

A

Free Enterprise

37
Q

1.09 Communism (socialism)

A

Government entities own most of the means of production and make most economic decisions.

38
Q

What is the equation for calculating CPI?

A
  1. Calculate last year price ( Last Yr $ ) / CPI Index
  2. Calc ten years ago price
  3. Calc % change in price

( Last year price - Ten yrs ago price ) / Ten yrs ago price

39
Q

1.10 What is the equation for calculating the multiplier effect?

A

Increase in output (equilibrium GDP) = CHG in spending / MPS

BEC (4 decks)

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