2 - Economic Concepts and Analysis Flashcards
Section 2 of BEC, Economic Concepts/Analysis
A _________ is an economic system is one in which the government largely determines production, distribution, and consumption of goods and services.
Command economic system
A ___________ is an economic system in which individuals, businesses, and distinct entities determine production, consumption, and distribution of goods and services.
Market (Free enterprise) economic system
Businesses acquire which three things from individuals in a free market economy:
Labor, Capital, and Natural Resources
As a result of the reciprocal relationship between the economic resources provided by individuals and the compensation received, the cost of production to business firms is _____________
equal to money compensation (income) of individuals
The desire, willingness, and ability to acquire a commodity is known as _______
Demand
Which two factors contribute to increase in individual demand at lower prices:
Income effect, substitution effect
The _________ effect is the ability of consumers to buy more units at a lower price
Income
The __________ effect contends that lower-priced items are purchased as substitutes for higher-priced items.
Substitution
The individual demand schedule is ________ sloped as quantity demanded increases as price decreases.
Negatively
The _________ is the quantity of a commodity that will be demanded by all individuals in the market at various prices during a specified time.
Market demand
Which 5 variables can change market demand:
Size of market Income/wealth of market participants Preferences of market participants Change in prices of other goods/services Expectations of price changes
The demand for a good or service that results from the demand for another related good or service
Derived demand
The quantity of a commodity provided either by an individual producer or all producers of a good or service at alternative prices during a specified period
Supply
Producers are normally willing to provide ________ quantities of goods and services only at ________ prices.
Higher quantities
higher prices
The _________ recognizes that once the fixed factors of production are being used efficiently, increasing production will cost more than the price average cost per unit.
Principle of increasing costs
The __________ shows the quantity of a commodity that will be supplied by all producers.
Market supply schedule
These 5 changes in the market can change aggregate supply:
Number of providers Cost of inputs change Technological advances Prices of other productive goods Expectations of price changes
The price at which the quantity of the commodity supplied in the market is equal to the quantity demanded by the market
Market equilibrium
A __________ occurs when the actual price is less than the equilibrium price;
Market shortage
A ________ occurs when the actual price is more than the equilibrium price
Market surplus
Government _______ and ________ can have the effect of increasing or decreasing the cost of production.
taxation
subsidization
The imposition of government regulation tends to _________ the cost of production and shift the market supply curve to the _________.
Increase
Left (Up)
An imposed _________ results in market supply being less than market demand.
Price ceiling - less than market equilibrium
An imposed __________ results in market supply being more than market demand.
Price floor - greater than market equilibrium
The measurement of the percentage change in one market factor as a result of an given change in another market factor.
Elasticity
% change in quantity demanded/ % change in price (perform a practice calculation)
Elasticity of demand
Which difference values can be used to calculate elasticity of demand: (3)
Prechange quantity demand and price (original Q/P)
Average of old and new quantity and price (midpoint/arc method)
New quantity and price
When the calculated elasticity of demand is greater than 1, then demand is ________.
elastic
Elastic demand results in a ________ in total revenues and price increases.
decrease
When the calculated elasticity of demand is less than 1, then demand is _________
Inelastic
