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🎶📒MicroEconomics > 2. Microeconomics 2 > Flashcards

2. Microeconomics 2 Flashcards

1
Q

Competitive demand

A

2 substitute goods

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2
Q

Complements

A

2 goods bought and consumed together
increase in the price of one good decreases demand for the other
(Negative XED)

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3
Q

Composite demand

A

Good is demanded for 2 or more distinct uses

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4
Q

Consumer surplus

A

Difference between market price and maximum a consumer would have been willing to pay

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5
Q

Contraction of demand

A

Movement along demand curve
Increase in price Leads to a reduction in quantity demanded

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6
Q

Contraction of supply

A

Movement along the supply curve
Fall in price reduces quantity supplied

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7
Q

Cross price elasticity of demand

A

Measure of responsiveness of quantity demanded for one good to a change in price of another good

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8
Q

Demand

A

The Quantity of a good or service people are willing to buy at a given price at a given time period

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9
Q

Demand curve

A

A graphical representation of the relationship between price and quantity demanded
Downward sloping- due to the law of demand.

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10
Q

Demand is price elastic

A

Quantity demanded changes more than proportionately to a change in price

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11
Q

Demand is price inelastic

A

Quantity demanded changes less than proportionately to a change in price.

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12
Q

Diminishing marginal utility

A

The consumption of an additional unit of a good yields less utility than the consumption of the previous unit.

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13
Q

Derived demand

A

Good is in demand as a result of demand for something else
Usually because the first good can be used to produce the second.

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14
Q

Effective demand

A

Willingness to buy backed by ability to pay

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15
Q

Elasticity

A

Responsiveness of one variable to a change in price of another

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16
Q

Excess demand

A

Quantity demanded exceeds quantity supplied, indicating the current price is below the equilibrium.

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17
Q

Excess supply

A

The quantity supplied exceeds quantity demanded, indicating the current price is above the equilibrium price.

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18
Q

Extension of demand:

A

A movement along the demand curve whereby a decrease in price leads to an increase in quantity demanded.

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19
Q

Extension of supply:

A

A movement along the supply curve where an increase in price leads to an increase in quantity supplied.

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20
Q

YED: Income elasticity of demand

A

A measure of responsiveness of quantity demanded for a good to a change in income

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21
Q

Inferior good

A

A good where demand decreases as income rises

YED negative

22
Q

Joint demand

A

The Relationship between 2 goods that are complements

23
Q

Joint supply

A

Increase in supply of one good leads to an increase in the supply of another

24
Q

Law of demand

A

An increase in price will lead to a fall in quantity demanded
(Ceteris paribus)

25
Q

Law of supply

A

An increase in price will lead to an increase in quantity supplied

26
Q

Luxury good

A

YED >1
Normal good, demand is income elastic

27
Q

Market forces

A

Interacting supply and demand

28
Q

Market clearing price

A

Neither excess supply or demand

Nobody who wishes to buy or sell who cannot

29
Q

Market equilibrium

A

Situation where Demand & supply are equal

30
Q

Normal good

A

Demand increases as income increases
Positive YED

31
Q

PED

A

Responsiveness of quantity demanded to a change in price

32
Q

PES

A

responsiveness of quantity supplied to a change in price

33
Q

Producer surplus

A

Difference between the market price and the minimum a seller would have been willing to sell at

34
Q

Substitute

A

A good that can be used for the same purpose as another
(2 goods in competitive demand)

Increase in the price of one good, increases quantity demanded of another.

Positive XED

35
Q

Supply

A

The Amount of a good or service that sellers are willing and able to sell at a given price

36
Q

Supply curve

A

A graphical representation of the relationship between price and quantity supplied, upward sloping due to the law of supply.

37
Q

The law of demand

A

Inverse relationship between price and quantity demanded

As price rises, fewer people are willing and able to buy the good
The costs will exceed the benefits from consumption

38
Q

The demand curve is also downward sloping due to

A

Diminishing marginal utility
The first unit of a good consumed provides the most utility, decreases with each subsequent unit consumed

39
Q

Contraction & extension of demand

A

Contraction: increase in price causes QD to be lower

Extension: decrease in price causes QD to be higher

40
Q

Supply is upward sloping:

A

LAW OF SUPPLY- Positive correlation between price and quantity supplied
the 2 are directly proportionate
As price rises, Quantity supplied increases.
Sellers have more of an incentive to sell

41
Q

A change in price causes a movement along the supply curve :
Extension and contraction of supply

A

Extension of supply- increase in price higher QS

Contraction of supply- A reduction in price will cause the quantity supplied to be lower

42
Q

Supply and demand cross = market equilibrium/ market clearing price

A

Quantity supplied= quantity demanded
No one who wants to sell but is unable to. Neither excess supply or demand.
A competitive market will move from one equilibrium to another.

43
Q

Market forces: allocate resources in the free market

A

Price and output are determined by changes in supply and demand

44
Q

Factors affecting demand:

A

Income
Price of other goods
Tastes and preferences
Expectations of the future

45
Q

Change in factors other than price will shift

A

Less of an incentive to buy= demand curve shifts left and down- at any given quantity the buyers will be willing to pay less.

46
Q

Income increase:

A

Consumers have more spending power
More people would be willing and able to pay.

47
Q

second hand car market shift left

A

Demand curve for used cars shifts left at the price p1 quantity demanded falls. As a result, there is excess supply and sellers will cut price from P1 to P2 to establish a new market equilibrium at Q2

48
Q

Price of other goods

A

Substitutes or complements:

49
Q

Tastes and preferences

A

Affects the buyer’s valuation of the food itself

50
Q

Factors affecting supply:

A

Cost of production
Subsidy
Tax
Price of other goods
Technology
Productivity
Government legislation
Expectations of future events
Firms entering or exiting the industry
Weather/ natural disaster (particularly in agriculture)

🎶📒MicroEconomics (7 decks)

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