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Microeconomics > Chapter 3 > Flashcards

Chapter 3 Flashcards

1
Q

Markets

A

bring buyers and sellers together, in/not in person, standardized products bought and sold

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2
Q

Demand curve represents

A

various amounts consumers are willing to and able to purchase a given product at specific price

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3
Q

Demand is associated with (4)

A

other things equal, a specific time frame, individual demand and market demand

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4
Q

describe the demand graph

A

price on y axis, quantity on x, decreasing curve, inverse relationship

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5
Q

Law of Demand

A

negative/inverse relationship, price falls quantity rises

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6
Q

supporting factors of law of demand (3)

A

diminishing marginal utility, Income/substitution effect,

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7
Q

diminishing marginal utility

A

goods and services satisfaction decrease as product is bought repeatedly

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8
Q

Income effect

A

price of g/s fall=consumer quantity rises with fixed income

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9
Q

Substitution effect

A

consumers look for substitute products that are similar and are a better deal

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10
Q

Market Demand

A

combination of all the individual buyers demands

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11
Q

When would the demand curve shift

A

results in a full shift if a determinate other than price were to change

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12
Q

Determinants of Demand (5)

A

consumers tastes, number of buyers, income, price of related goods, consumer expectations

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13
Q

Normal Good

A

demand varies directly with money income

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14
Q

inferior good

A

goods for which demand varies inversely with income

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15
Q

increasing income effect on goods

A

increase demand for the better quality good and less for the less quality so it helps normal

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16
Q

decreasing income effect on goods

A

decreases demand for better quality but raises demand for less quality so it helps inferior

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17
Q

Substitute good

A

goods and service that can be used in place of each other ex butter and margine,

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18
Q

complementary goods

A

goods and services used together ex phone and cell service

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19
Q

unrelated goods

A

products unrelated, ex apple and car, increase or decrease of p have no effect

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20
Q

Consumers expectations effect on demand

A

consumers predictions and expectations of products can shift demand curve in both directions ex they think price will go up=buy now, price will decline=save

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21
Q

Shift of the whole demand curve is caused by

and is also called

A

determinant factor other than price

change in demand

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22
Q

shift along the demand curve is caused by

and is also called

A

price changes of product

change in quantity demanded

23
Q

how demand increases by shifting to the right

A

favourable taste, increase #buyers, increase income, decrease inferior good, increase substitute, decrease complementary, consumer predicts high price in future

24
Q

Supply

A

amounts that producers are willing and able to produce/make available for sale at specific price

25
Q

Supply curve graph described

A

price on y axis, quantity supplied on x-axis, direct relationship (producer/firm view)

26
Q

Law of Supply

A

direct relationship, price is revenue!!, offer more product at high price than low to gain revenue

27
Q

Market Supply

A

total supply of all markets

28
Q

Consumer view

A

higher price we buy less

29
Q

Producer/firm view

A

higher price we supply more for revenue

30
Q

Determinants of Supply shifts (6)

A

factor price, technology, taxes and subsidies, price of other goods, producer expectations, #of buyers

31
Q

shift of supply curve is caused by

and is also called

A

change in determinant other than price

change in supply

32
Q

shift along supply curve and is also called

A

change in price of product being supplied

change in quantity of supply

33
Q

Equilibrium

A

QD=QS intensions of buyers and producers the same

34
Q

equilibrium price

A

price at which QD=QS

35
Q

Surplus

A

QS>QD

36
Q

define Rationing Function of prices

A

ability of competitive forces of demand, and supply to establish a price at which selling and buying decisions are consistent. push for equilibrium

37
Q

explain the meaning behind rationing function of prices

A

buyers who are willing and able to pay eqbm price will obtain product. those who cannot and will not do not obtain product. same for sellers only those who sell at eqbm will sell and those that don’t sell at eqbm price will not sell

38
Q

Efficient Allocation

A

Production and Allocative Efficiency

39
Q

Production Efficiency

A

production of any good in least costly way while prodicing max quantity of goods

40
Q

Allocative Efficiency

A

producing goods and services highly valued by society

41
Q

how is equilibrium price changed

A

changes in shift of demand or supply curve

42
Q

Demand is also marginal

A

benefit of good

43
Q

supply is also marginal

A

cost of good

44
Q

Complex cases

A

when s and d change, effect is combination of individual effects and eqbm p and q may be predicted

45
Q

Government setting prices example

A

Price Ceiling, Price Floor

46
Q

Price Ceiling

A

legally establish maximum price for good and service, often creates a shortage

47
Q

price ceiling and shortage

A

if price ceiling is lower than original price to allow more people to buy, so a shortage is created

48
Q

price ceiling alternate rationing system

A

standing in line, coupons,

49
Q

what is the issue of counteracting price ceiling shortages

A

since consumers are willing to pay higher then government price, incentive under the table deals occur

50
Q

Price Floor

A

legally established price above equilibrium, leads to surplus

51
Q

price floor problems

A

society devotes to many resources to the price floor, inefficient produces do not exist in market, without price floor, higher cost producers don’t make profit

52
Q

counteract price floor

A

government could buy surplus, or allow producers to take some of their inputs out of production

53
Q

Shortage

A

QS < QD

Microeconomics (8 decks)

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