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macro > chapter 3 > Flashcards

chapter 3 Flashcards

1
Q

Demand curve is _____ sloping?

A

downward sloping

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2
Q

Demand curve tells what?

A

How much of a items people are willing to buy at different prices

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3
Q

What is income effect?

A

The change in the quantity demanded of a good that results due to a change in the price of a good which changes the buyer’s purchasing power

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4
Q

Buyer’s reservation price is what?

A

The largest dollar amount the buyer would be willing to pay for a good.

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5
Q

The supply curve is what sloping?

A

upward sloping; Thus quantity and Price are directly related

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6
Q

The supply curve tells you what?

A

The number of a product a market is willing to sell at each price

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7
Q

Seller’s reservation price?

A

The smallest dollar amount for which a seller would be willing to sell an additional unit

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8
Q

Seller’s reservation price is generally equal to what?

A

marginal cost

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9
Q

What does it mean by being satisfied?

A

Occurs when market is in equilibrium; when the sellers can sell everything they want to sell at a certain price and buyers are able to buy exactly as many units of goods as they wish to at equilibrium price.

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10
Q

Price ceiling is what?

A

Unlawful to charge more than the price ceiling

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11
Q

quantity demand occurs from what?

A

price change

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12
Q

What are common causes of shifts in demand curve?

A
  • Price in complements
  • Price in substitutes
  • Change in income such as through federal pay raise
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13
Q

What are common causes of supply cost?

A
  • changes in cost of resources (inputs) needed to make product/service
  • Change in marginal cost (reduction will cause right shift in marginal cost)
  • Technical changes
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14
Q

What reduces marginal cost?

A

decline in wage rate such as with carpenters reduces making new houses and this means for any given price, more builders can profitably serve the market than before.

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15
Q

An increase in demand will lead to an increase in what?

A

Increase in BOTH equilibrium and quantity

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16
Q

A decrease in demand will lead to what?

A

Decrease in BOTH equilibrium and quantity

17
Q

An increase in supply will lead to what?

A

DECREASE in Equilibrium but INCREASE in Quantity

18
Q

A decrease in supply will lead to what?

A

INCREASE in Equilibrium but DECREASE in quantity

19
Q

An increase in population of potential buyers will do what to to the demand curve?

A

Increase or shift it to the right/upward direction.

20
Q

An increase in expected rise in prices in the near future will do what to demand now?

A

Increase or shift demand curve to the right/upward direction.

21
Q

An increased preference be demanders for a good or service will do what to the demand curve?

A

increase it or shift it to right or upward

22
Q

An increase in income for a normal good will do what to deamnd curve

A

shift it to the right

23
Q

An improvement in weather does what for the supply curve?

A

Increases supply cure or shifts in rightward or downwards.

24
Q

An expectation of lower prices in the future will do what to the supply curve?

A

Shift supply curve to the right or downward

25
Q

An increase in suppliers will do what?

A

Shift demand curve to the right and downward

26
Q

Buyer’s surplus

A

Difference between reservation price and price actually pays

27
Q

Sellers surplus?

A

Difference between the price she recieves and her reservation price

28
Q

Total surplus?

A

Sum of buyers surplus and sellers surplus

29
Q

cash on the table?

A

Metaphor for unexploited opportunities; when people failed to take advantage of all mutually beneficial exchanges

30
Q

When is there cash on the table?

A

-When price in market is below equilibrium because reservation price of sellers (marginal cost) will always be lower than reservation price of buyer.

31
Q

Social optimal quantity of any good

A

is the quantity that maximizes the total economic surplus that results from producing and consuming the good.

32
Q

Social optimal quantity is when what?

A

Marginal cost and marginal benefit are the same.

33
Q

Failure to achieve efficency means what?

A

total economic surplus is smaller than it could have been

34
Q

When is there no cash on the table?

A

At equilibrium; when there is no unexploited opportunities for individuals

macro (5 decks)

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