Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

comm 220: market analysis > chapter 2 (CASA): the basic of supply and demand > Flashcards

chapter 2 (CASA): the basic of supply and demand Flashcards

1
Q

what does the supply curve demonstrate?

A

The relationship between the quantity of a good that producers are willing to sell and the price of the good

all other supply-determining factors (e.g., wages, interest charges, raw material costs, etc.) remain constant

QS = QS(P)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

how is the shape of supply curve? why?

A

The Supply Curve slopes upward

at higher prices, more firms are able and willing to increase output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what happens to the supply curve when there is lower production costs? what does this ultimately mean?

A

the entire supply curve shifts to the right

there is greater quantity supplied at the same price, or same quantity supplied at a lower price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what happens to the supply curve when there is higher production costs? what does this ultimately mean?

A

the entire supply curve shifts to the left

there is lower quantity supplied at the same price, or same quantity supplied at a higher price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what determines change in Quantity supplied?

A

price changes (movement along the supply curve)

Changes in supply determining factors (shift of the supply curve)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what does the demand curve demonstrate?

A

The relationship between the quantity of a good that consumers are willing to buy and the price of the good

holding other demand-determining factors (e.g., incomes, tastes, weather, prices of substitute and complementary goods, etc.) constant

QD = QD(P)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what is the shape of the demand curve? what does this mean?

A

The Demand Curve slopes downward

it demonstrates that less consumers are able and willing to buy at a higher price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what would happen to the demand curve if consumer income increase? what does this mean?

A

the entire demand curve shifts to the right

it means greater quantity demanded at the same price, or same quantity demanded at a higher price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what would happen to the demand curve if consumer income decrease? what does this mean?

A

the entire demand curve shifts to the left

it means lower quantity demanded at the same price, or same quantity demanded at a lower price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what determines change in Quantity demanded?

A

Price change (movement along the demand curve)

Changes in demand-determining factors (shift of the demand curve)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what is the equilibrium price?

A

QD = QS

market-clearing price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what is the goal of a free market?

A

to reach the equilibrium price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

in a graph, where do the graphs to demonstrate equilibrium?

A

wherever the supply and demand curves intersect

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

how do we know there is a market surplus?

A

Market price > equilibrium

QS > QD

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

how does a free market react after realizing the is a market surplus?

A

Downward pressure on price,
P1 falls to P0

QD increases and QS decreases

Market adjusts to equilibrium

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

how do we know there is a market shortage?

A

Market price < equilibrium

QD > QS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

how does a free market react after realizing the is a market shortage?

A

Upward pressure on price,
P1 rises to P0

QD decreases and QS increases

Market adjusts to equilibrium

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

what determines the market clearing price in a free market?

A

S and D interact to determine the market-clearing price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what happens when there is no equilibrium?

A

the market will adjust to alleviate a shortage or

surplus and return the market to equilibrium

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

how does a market need to be so that the free market mechanism remain effective?

A

Markets must be competitive

21
Q

what influences the shifts in market equilibrium?

A

the shifts in the supply and demand curves

22
Q

When S and D change simultaneously, the impact on the equilibrium price and quantity is determined by?

A

The relative size and direction of the change

The shape of the supply and demand models

23
Q

price elasticity of demand?

A

Measures the percentage change in the quantity demanded of a good resulting from a one-percent change in price

measures basically how a change in price can influence qui quantity demanded

24
Q

what is the formula for price elasticity of demand?

A

E PD = (%∆QD)/(%∆P) = (∆QD/QD)/(∆P/P) = (P/QD) *(∆QD/∆P) < 0

25
Q

when is a good price elastic?

A

|E PD| > 1

it means that a little change of price will significantly change the quantity demanded

26
Q

when is a good price elastic?

A

|E PD| < 1

it means that a little change of price will insignificantly change the quantity demanded

27
Q

what does the price elasticity of a good depend on?

A

depends on the availability of substitute goods

EPD depends on the slope and the values of P and Q

28
Q

where must the price elasticity of a good be measured? why?

A

EPD must be measured at a particular point on the demand curve because EPD
changes along the demand curve

29
Q

on a demand curve, where is the good price elastic?

where is it inelastic?

A

The top portion of QD is elastic

The bottom portion of QD is inelastic

30
Q

what are the extreme case of elasticity of demand?

A

Completely inelastic demand

Infinitely elastic demand

31
Q

what are the other demand elasticities excluding price elasticity of demand?

A

Income Elasticity of Demand

Cross-Price Elasticity of Demand

32
Q

Income Elasticity of Demand

A

measures the percentage change in the quantity demanded of a good resulting from a one-percent change in income

basically, if a change of income greatly influences the quantity demanded of a good

33
Q

Cross-Price Elasticity of Demand

A

measures the percentage change in quantity demanded of good A resulting from a one-percent change in the price of good B

basically, if a price change of a substitute or complement greatly influences the quantity demanded of a good

34
Q

what is the formula for the Income Elasticity of Demand?

A

E ID = (∆QD/QD) / (∆I/I) = (I/QD) * (∆QD/∆I)

35
Q

what is the formula for the Cross-Price Elasticity of Demand?

A

E QaPb = (∆Qa/Qa) / (∆Pb/Pb) = (Pb/Qa) * (∆Qa/∆Pb)

36
Q

when you consider the Cross-Price Elasticity of Demand, when is the result a complementary good? why?

A

when the resulting elasticity is negative

because an increase in the price of B leads to a decrease in the quantity demanded for A

a decrease in the price of B leads to a increase in the quantity demanded for A

37
Q

when you consider the Cross-Price Elasticity of Demand, when is the result a substitute good? why?

A

when the resulting elasticity is positive

as the price of one good rises, the demand for the substitute good increases

as the price of one good decreases, the demand for the substitute good decreases

38
Q

price elasticity of supply

A

Measures the quantity supplied of a good resulting from a one-percent change
in price

basically, if a price change significantly influences the quantity supplied

39
Q

what is the formula for price elasticity of supply

A

same as the one for demand

40
Q

Point elasticity of demand

A

EPD at a particular point on the demand curve

41
Q

Arc elasticity of demand

A

EPD calculated over a range of prices

42
Q

When to use arc elasticity of demand?

A

used when there is not a general function for the relationship of two variables, but two points on the relationship are known

43
Q

When to use point elasticity of demand?

A

requires detailed knowledge of the functional relationship and can be calculated wherever the function is defined

44
Q

what correlations can you make between the elasticity formula and the linear formulas for supply and demand?

A

The slope of QD = ∆Qd/∆P = -b

The slope of QS = ∆Qs/∆P = d

ED = –b(P/Q)

ES = d(P/Q)

P* being equilibrium price

Q* being equilibrium quantity

45
Q

how can elasticity if income come into play in the the demand formula?

A

Qd = a -bP + fI

f being elasticity of income

46
Q

if demand falls by 20%, what happens to demand curve?

A

the entirety of the demand curve shifts to the left by 20%

if the astronauts formula was QD = 13.5 – 8P, now it will be Q’D = 10.8 – 6.4P

we only consider 80%

47
Q

are markets usually free of government intervention?

A

nah boy

48
Q

how can government intervene?

A

– Imposed taxes and granted subsidies

– Price controls

49
Q

what do price controls do?

A

usually hold the price above or below the equilibrium price

can create excess demand or excess supply

comm 220: market analysis (37 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions