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2-11. BA 21C - Basic Microeconomics > Chapter 2: The Market Forces of Demand > Flashcards

Chapter 2: The Market Forces of Demand Flashcards

1
Q

an organization that transforms resources (inputs) into products (output).

A

Firm

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2
Q

the primary producing units in a market economy.

A

Firm

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3
Q

a person who organizes, manages, and assumes the risks of a firm, taking a new idea or a new product and turning it into a successful business.

A

Entrepreneur

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4
Q

The consuming units in an economy

A

Households

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5
Q

The 3 basic decision - making units

A
  1. Firm
  2. Entrepreneur
  3. Households
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6
Q

are the markets in which goods and services are exchanged

A

Output or Product markets

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7
Q

The 3 input markets

A
  1. Labor Market
  2. Capital Market
  3. Land Market
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7
Q

are the markets in which resources—land, labor, and capital used to produce products are exchanged.

A

Input markets

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8
Q

Household supply work for wages to firms that demand labor

A

Labor Market

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9
Q

Households supply land or other real property in exchange for rent.

A

Land Market

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10
Q

households supply their savings, for interest or for claims to future profits to firms that demand funds to buy capital goods.

A

Capital Market

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11
Q

Is a group of buyers and sellers of a particular product

A

Market

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12
Q

Is one with many buyers and sellers, each has a negligilbe effect on price.

A

Competitive market

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13
Q

Formula of Getting Price elasticity of Demand

A

Ped = %^QD / %^P

Ped = Qd2 - Qd1 / Q1
———————-
P2 - P1 / P1

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14
Q

Buyers and sellers so numerous that no one can affect market price

A

Price taker

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15
Q

states that there is a negative or inverse relationship between price of the good itself and the quantity of the good emanded.

A

Law of Demand

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15
Q

The claim that the quantity demanded of a good falls when the price of the good rises, other things equal.

A

Law of Demand

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16
Q

IS the amount of the good that buyers are willing and able to purchase.

A

Quantity demanded

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17
Q

Is the willingness and the ability of buyers to purchase goods and services

A

Demand

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18
Q

a table that shows the relationship between the price of a good and the quantity demanded

A

Demand Schedule

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19
Q

Is a graph that illusstrating how much of a given product a household would be willing to buy at different prices

A

Demand Curve

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20
Q

Are goods for which demand goes up when income is higher and for which demand goes down when income is lower.

A

Normal Goods

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20
Q

The 7 factors affecting Demand Curve

A
  1. # of Buyers
  2. Income
    3.Price of related Goods
  3. Tastes
  4. Expectations
  5. Quality
  6. Advertisement
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21
Q

are goods for which demand falls when income rises

A

Inferior goods

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22
Q

Is the sum of all household’s wages, salaries, profits, interest payments, rents, and other forms of earnings in a given period of time.

A

Income

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23
Q

True or False

If income will increase, demand for some goods will decrease but not the demand for all goods

A

False

(If income will increase, demand for some goods will increase but not the demand for all goods)

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24
Q

True or False

Increase in # of buyers, increases quantity demanded at each price. Shifts D curve to the right.

25
Q

True or False

Decrease in # of buyers, shifts D curve to the right.

A

False

(Decrease in # of buyers, shifts D curve to the left.)

26
Q

are goods for which demand goes up when income is higher and for which demand goes down when income is lower.

A

Normal Goods

27
Q

are goods for which demand falls when income rises.

A

Inferior Goods

28
Q

Demand for a _________ is positively related to income. Increase in income causes increase in quantity demanded at each price, shifts D curve to the ______.

A

Normal Goods; right

29
Q

Demand for an ________ is negatively related to income. An increase in income shifts D curves for inferior goods to the _______.

A

inferior good; left

29
Q

are goods that can serve as replacements for one another; when the price of one increases, demand for the other goes up.

A

Substitute goods

29
Q

are identical products.

A

Perfect substitutes

29
Q

are goods that “go together”; a decrease in the price of one results in an increase in demand for the other, and vice versa.

A

Complement

30
Q

Two goods are ________ if an increase in the price of one causes an increase in demand for the other

A

substitutes

31
Q

Two goods are _________ if an increase in the price of one causes a fall in demand for the other.

A

complements

32
Q

A movement along the demand curve caused by a change in the price of the good itself.

A

CHANGE IN QUANTITY DEMANDED

33
Q

A shift in the demand curve caused by a change in the factors/variables affecting demand

A

CHANGE IN DEMAND

34
Q

4 basic types of elasticity:

A

¢Price elasticity of demand
¢Price elasticity of supply
¢Income elasticity of demand
¢Cross Price elasticity of demand

35
Q

is a measure of how much the quantity demanded of a good responds to a change in the price of that good

A

price elasticity of demand

36
Q

is always measured in percentage terms.

A

Elasticity

36
Q

is the percentage change in quantity demanded due to a percentage change in the price.

A

Price elasticity of demand

36
Q

Kinds of demand elasticity

A
  1. Elastic demand
  2. Inelastic demand
  3. Unit Elastic demand or Unitary demand
36
Q

states that when the price of a good rises, and everything else remains the same, the quantity of the good demanded will fall.

A

law of demand

37
Q

Quantity demanded responds strongly to changes in price.

A. Elastic demand
B.. Inelastic demand
C. Unit Elastic demand or Unitary demand

38
Q

Demand is _______ if the percentage change in quantity demanded is equal to the percentage in price

A. Elastic demand
B.. Inelastic demand
C. Unit Elastic demand or Unitary demand

39
Q

Demand is if the percentage change in quantity demanded is less than the percentage change in price

A. Elastic demand
B.. Inelastic demand
C. Unit Elastic demand or Unitary demand

40
Q

Demand is _______ if the percentage change in quantity demanded is greater than the percentage change in price

A. Elastic demand
B.. Inelastic demand
C. Unit Elastic demand or Unitary demand

41
Q

Increasing price would reduce TR

41
Q

is the amount paid by buyers and received by sellers of a good.

A

Total Revenue

42
Q

Increasing price would increase TR

42
Q

Reducing price would increase TR

43
Q

The responsiveness of demand of one good to changes in the price of a related good – either a substitute or a complement

A

Cross Price Elasticity of Demand

44
Q

Reducing price would reduce TR

45
Q

Cross Elasticity will have negative sign (inverse relationship between the two)

A

Goods which are compliments

45
Q

Cross Elasticity will have a positive sign (positive relationship between the two)

A

Goods which are substitutes

46
Q

shows the connections between firms and households in input and output markets

A

circular flow of economic activity

47
Q

The good is considered a luxury good

48
Q

The good has many substitutes

49
Q

If lesser proportion of income is spent on the good

50
Q

The good has no substitute

51
Q

If a greater proportion of income is spent on the good

52
Q

If a good is considered a necessity

53
Q

Who are you?

A

A CPA, Lawyer, Doctor, master degree holder and has 3 certifications in my belt.

2-11. BA 21C - Basic Microeconomics (4 decks)

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