1.0 Economics Concept & Strategy Flashcards
1.02 What is the equation for Price Elasticity of Demand?
Price Elasticity of Demand = % Change in Qty demanded / % Change in Price
1.02 Calculate the % change in quantity demanded
Change in QTY demanded / Avg QTY demanded
1.02 Calculate % change in Price
Change in price / AVG price
1.02 What is the concept of price elasticity?
It measures how responsive the quantity demanded (of a good/service) is to a change in price.
1.02 What does Cross-Elasticity of Demand measure?
-It measures the change in the quantity demanded of a good to a change in the price of ANOTHER good.
1.02 What is the relationship between goods that are subsitutes? (Cross-Elasticity)
Two different goods are substitutes if they result in a direct relationship ( + ).
1.02 What is the relatioship between goods that are complements? (Cross-Elasticitiy)
Two different goods are complements if they result in an inverse relationship ( - ).
1.03 What is the equation for Price Elasticity of Supply?
Price Elasticity of Demand = % Change in Qty Supplied / % Change in Price
1.03 What is the effect if governments impose a price-cieling below equilibrium?
Quantity Demanded will exceed Quantity Supplied.
1.03 What is a Price Ceiling?
Maximum Legal Price at which a product or service may be sold at.
1.03 What is a Price Floor?
The minimum legal price at which a product or service may be sold at.
1.03 What is the effect if goverments impose a price-floor above the equilibrium?
Quantity Supply will exceed Quantity Demanded.
1.05 What is the law of diminishing marginal utility?
The more a consumer consumes of a particular product, the less satisfying will be the next unit of that product.
1.05 What is the percentage of the next dollar of income that the consumer would be expected to spend?
Marginal Propensity to Consume (MPC)
1.05 What is Marginal Propensity to Save (MPS)?
The percentage of the next dollar that the consumer would be expected save.
1.06 Marginal Cost (MC)
The increase in cost that results from producing one extra unit.
1.06 Marginal Revenue (MR)
The change in total revenue received by the addition of one more unit of output.
1.06 Marginal Revenue Product
The increase in total revenue received by the addition of one additional unit of an input or resource (ex: one more worker)
1.06 Returns to Scale
The increases in units producted (output) that result from increases in production costs.
1.06 Percentage increase in output / Percentage increase in input
Returns to Scale
1.06 Economies of Scale
Increased efficiencies from producing more units of a product. > 1
1.06 What may contribute to Economies of Scale?
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.
1.06 Diseconomies of Scale
Increased inefficiencies.
1.06 Constant Returns to Scale
Range of output for which increases in the use of inputs yield proportionate increases in output.
