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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.

A

True

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

A

A.

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

A

C.

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

A

B.

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

A

A.

41
Q

Increasing price would reduce TR

A

Elastic

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

A

Inelastic

42
Q

Reducing price would increase TR

A

Elastic

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

A

Inelastic

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

A

Elastic

48
Q

The good has many substitutes

A

Elastic

49
Q

If lesser proportion of income is spent on the good

A

Inelastic

50
Q

The good has no substitute

A

Inelastic

51
Q

If a greater proportion of income is spent on the good

A

ElasticI

52
Q

If a good is considered a necessity

A

Inelastic

53
Q

Who are you?

A

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

54
Q
A

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

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