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Economics > Ch.4 > Flashcards

Ch.4 Flashcards

1
Q

market price

A

the price at which goods can be sold in an open market with many potential sellers and buyers

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2
Q

marginal utility

A

the amount of satisfaction that results from a one-unit increase of a product

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3
Q

total utility

A

the total amount of satisfaction received from possessing a certain amount of a particular good

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4
Q

law of demand

A

the free market principle stating that as a the price of a good increases, the quantity demanded decreases, assuming other factors remain equal; as the price of a good falls, the quantity demanded rises

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5
Q

law of supply

A

the free market principle stating that as the price of a good increases, the quantity supplied also increases, assuming other factors remain equal; as the price of a good falls, the quantity supplied also falls

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6
Q

demand schedule

A

a list of numbers that compares price with quantity demanded

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7
Q

supply schedule

A

a list of numbers that compares price with quantity

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8
Q

demand curve

A

a graphic representation of the quantity of goods purchased at different prices within a specified amount of time; slopes downward and to the right

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9
Q

supply curve

A

a graphic representation of the quantity of goods supplied at different prices within a specified amount of time; slopes upward and to the right

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10
Q

normal good

A

a good whose demand is directly related to consumer incomes

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11
Q

inferior good

A

a good whose demand decreases and consumer incomes increase

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12
Q

substitute good

A

a good capable of being used in place of another good

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13
Q

complementary good

A

a good often used in conjunction with another

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14
Q

subsidies

A

monetary assistance given by government to business to encourage production

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15
Q

equilibrium

A

the point at which quantity demanded and quantity supplied are equal

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16
Q

shortage

A

a situation in which the quantity demanded exceeds the quantity supplied at a given price

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17
Q

surplus

A

a situation in which the quantity supplied exceeds the quantity demanded at a given price

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18
Q

price ceiling

A

a limit that the government places on how high a producer may charge for his product; price level set below the equilibrium price

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19
Q

price floor

A

a limit that the government places on how low a producer may charge for his product; price level set above the equilibrium price.

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20
Q

value in use

A

value that is directly related to the benefits their owners receive through their use

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21
Q

the dedham farmer and the boston merchant bargain

A

in this story, a dedham farmer with wooden boards that don’t hold that much value to him traded with a man who owned 50 barrels of molasses and was in need of woods to expand his warehouse. This story illustrates the idea that we place values on goods based upon our personal preferences and circumstances, as well as how much of the good we already have

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22
Q

value in exchange

A

what a particular good is worth in exchange for some other good; alos known as trading value

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23
Q

price

A

the amount of money that a buyer pays a seller for a good

24
Q

diminishing marginal utility

A

the principle stating that as one’s supply of a specifific good or services increases, the satisfaction derived from each additonal unit decreases

25
Q

total utility

A

the overall utility a good has to someone

25
Q

marginal and total utility EX

A

Marginal: satisfaction from an individual hamburger
total: combined satisfaction of multiple hamburgers

26
Q

income effect

A

the principle stating that when the price of a good falls, consumers tend to buy more of that good or of other items because they can do so without giving up anything; when prices rise, consumers can no longer buy as much as they did before, which has the same effect as if their income were to be reduce

27
Q

for everyone there is a point at which price becomes

A

the decisive consideration, the point at which a consumer alters his economic behavior

27
Q

quantity demanded

A

the quantity of a good that consumers will buy at a given price per unit within a specified amount of time

27
Q

substitution effect

A

the principle stating that people tend to substitute less expensive goods for goods whose prices have risen

28
Q

change in demand

A

a shift in the demand curve cause by changes in 5 key factors: in taste and preferences, income, population, prices of related goods, or consumer expectations

29
Q

income

A

chnages in consumer incomes result in normal goods (direct relationship) and inferior goods (inverse)

30
Q

population

A

includes population growth/decline and a shift in age structure

31
Q

prices of related goods

A

there are subsittute and complementary goods when their prices change it affects demand shifts

32
Q

consumer expectations

A

what consumers expect will happen in the future

33
Q

change in quantity demanded

A

movement from one point to another along a fixed demand curve. only factor that can cause this is price changes

34
Q

quantity supplied

A

the quantity of a good that producers will supply at a given price per unit within a specificized amount of time

35
Q

change in supply

A

a shift in the supply curve caused by changes in technology, resource prices, prices of related goods, number of sellers, producer expectations, or government taxes, subsides, and regulations

36
Q

technology

A

tech improvements have the largest influence on the amount of goods that producers are able to supply. More tech advances means less money to produce a good.

37
Q

resource prices

A

the amount that producers have to pay to obtain the resources they need determines the supply of a good.

38
Q

prices of related goods

A

Example: if prices that consumers were willing to pay for motorized scooters fell, manufacturers would produce less of that and make substitute goods such as bikes which would increase the supply of bikes.

39
Q

number of sellers

A

an increase in the number of businesses who make a good increases the supply of a good. A decrease in those businesses would decrease the supply.

40
Q

producer expectations

A

supply is affected by the expectation producer have about the future pricing of their goods

41
Q

governement taxes, subsides and regulations

A

he roles that government plays in the supply of goods made available to the public is in direct proportion to how much the government is involved in the market. The more taxes and regulations that the government enforces, the fewer goods businesses can supply. Sometimes governments give subsidies.

42
Q

change in quantity supplied

A

movement form one point to another along a fixed supply curve. caused by change in price within an existing supply

43
Q

equilibrium is the point

A

that suppliers try to find in order to know what price to place on their goods and how many goods to produce at that price.
Without reliable information on the estimates of the demand, supply, and equilibrium price, there can be a shortage or a surplus

44
Q

as the supply and demand of a good shift

A

the equilibrium price of that good also shifts

45
Q

price elasticity of demand

A

if prices go up, people will buy less

46
Q

elasticity

A

the responsiveness of the quantity supplied or the quantity demanded to a change in a good’s price

47
Q

a major reason why the demand for most goods is elastic

A

the availability of substitutes

48
Q

inelastic

A

demand for a good is inelastic when consumers will pay very high price for a particular commodity because they feel there are no substitutes

49
Q

the result of price fixing by governments

A

is either overproduction or underproduction of goods which damages economies.

50
Q

price ceilings result in

A

shortages

51
Q

price floors result in

A

surpluses

52
Q

the high lord of the market place

A

Illustrates that a central power controlling the market place results in an unsuccessful economy.

53
Q

efficient production and prices are based on

A

the free choices of millions of people, functioning both as suppliers and demanders, working together with the framework of a free market economy

54
Q

gov control example

A

Illustrates that a central power controlling the market place results in an unsuccessful economy.

Economics (15 decks)

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