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Microeconomics > Booklet 2 > Flashcards

Booklet 2 Flashcards

1
Q

What is the relationship between two goods that are substitutes called?

A

Competitive demand

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2
Q

What are goods that are bought and consumed together, such that an increase in the price of one will lead to a fall in the demand for another (XED is negative) called?

A

Complements

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3
Q

What is it called when a good is demanded for more than one distinct purpose/use?

A

Composite demand

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4
Q

What is the difference between the market price and the maximum price that a consumer would have been willing to pay?

A

Consumer surplus

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5
Q

What is a movement along the demand curve whereby an increase in price leads to a reduction in the quantity demanded called?

A

A contraction of demand

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6
Q

What is a movement along the supply curve whereby a fall in price causes a reduction in quantity supplied called?

A

A contraction of supply

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7
Q

What is a measure of the responsiveness of the quantity demanded of one good to a change in the price of another good?

A

The cross-price elasticity of demand

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8
Q

What is the quantity of a good or service that people are willing to buy at a given price, in a given time period called?

A

Demand

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9
Q

What is a graphical representation of the relationship between price and quantity demanded, usually downward-sloping due to the law of demand called?

A

A demand curve

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10
Q

What is it called when quantity demand changes more-than-proportionately to a change in price?

A

Demand is price elastic

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11
Q

What is it called when quantity demanded changes less-than-proportionately to a change in price?

A

Demand is price inelastic

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12
Q

What is the phrase used to describe how consumption of an additional unit of a good yields less utility than the consumption of the previous unit?

A

Diminishing marginal utility

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13
Q

What is called when a good is in demand as a result of the demand for something else, usually because the first good can be used to produce the second?

A

Derived demand

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14
Q

What is the willingness to buy, backed by the ability to pay called?

A

Effective demand

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15
Q

What is a measure of the responsiveness of one variable to a change in the price of another called?

A

Elasticity

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16
Q

What is it called when the quantity demand exceeds the quantity supplied, indicating that the current price is above the equilibrium price?

A

Excess demand

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17
Q

What is called when the quantity supplied exceeds the quantity demanded, indicating that the current price is above the equilibrium price?

A

Excess supply

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18
Q

What is a movement along the demand curve whereby a decrease in price leads to an increase in quantity demanded called?

A

An extension of demand

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19
Q

What is a movement along the supply curve whereby an increase in price causes an increase in quantity supplied called?

A

An extension of supply

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20
Q

What is a measure of the responsiveness of the quantity demanded for one good to a change in income(s) called?

A

Income elasticity of demand

21
Q

What is a good for which demand decreases as incomes rise and increases as incomes fall (YED is negative) called?

A

An inferior good

22
Q

What is the relationship between two goods that are complements called?

A

Joint demand

23
Q

What is it called when an increase in the supply of one good leads to an increase in the supply of another?

A

Joint supply

24
Q

What term describes how an increase in price will lead to a fall in quantity demanded, a fall in price will lead to an increase in quantity demanded (ceteris paribus).?

A

The law of demand.

25
Q

What term describes how an increase in price will lead to an increase in quantity supplied and a decrease in price will lead to a decrease in quantity supplied?

A

The law of supply

26
Q

What is a normal good for which demand is income elastic (YED>+1) called?

A

A luxury good

27
Q

What is the “place” where buyers and sellers of a good or service interact for the purposes of exchange called?

A

A market

28
Q

What terms describes the interaction of supply and demand to determine outcomes within a market (as opposed to the effects of intervention by the government)?

A

Market forces

29
Q

What term describes the price at which nobody wishes to buy or sell but cannot- there is neither excess demand nor supply?

A

The market-clearing price

30
Q

What is a situation where the demand for and supply of a good are equal, such that there is no tendency for price and quantity to change (without a change in supply or demand) called?

A

The market equilibrium

31
Q

What does more than proportionate mean?

A

Changing by a larger percentage.

32
Q

What is a good for which demand increases as incomes rise and decreases as incomes fall (YED is positive) called?

A

A normal good

33
Q

What is a measure of the responsiveness of the quantity demanded of a good to a change in price called?

A

The price elasticity of demand

34
Q

What is a measure of the responsiveness of quantity supplied to a change in price called?

A

The price elasticity of supply

35
Q

What is the difference between the market price and the minimum price that a seller would have been willing to sell it for called?

A

Producer surplus

36
Q

What is a good that can be used for the same purpose as another (therefore the two goods are in competitive demand), such that an increase in the price of one good leads to an increase in demand for another (XED is positive) called?

A

A substitute

37
Q

What is the amount of a good or service that sellers are willing and able to sell at a given price called?

A

Supply

38
Q

What is a graphical representation of the relationship between price and quantity supplied, it is usually upward-sloping due to the law of supply called?

A

A supply curve

39
Q

What determines PED?

A

Brand loyalty
Necessity Vs luxury
Availability of substitutes
Habit and addiction
Expected duration of price change
Proportion of income

40
Q

What is the formula for the price elasticity of demand?

A

Percentage change in quantity demanded/ Percentage change in price

41
Q

What is demand if PED is negative infinity?

A

Perfectly price elastic

42
Q

What is demand if PED is greater than negative infinity but less than -1?

A

Relatively price elastic

43
Q

What is demand if PED is equal to -1?

A

Unitary price elastic

44
Q

What is demand if PED is greater than -1 but less than 0?

A

Relatively price inelastic

45
Q

What is demand if PED is equal to 0?

A

Perfectly price inelastic

46
Q

What is the formula for income elasticity of demand?

A

Percentage change in quantity demanded/ Percentage change in income

47
Q

What is the formula for cross price elasticity of demand?

A

Percentage change in quantity demanded for good X/Percentage change in price of good Y

48
Q

What is the formula for price elasticity of supply?

A

Percentage change in quantity supplied/Percentage change in price

Microeconomics (7 decks)

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