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chapter 4&5 test Flashcards

1
Q

demand

A

the desire to have some good or service and the ability to pay for it

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2
Q

law of demand

A

states that when the price of a good or service falls, consumers buy more of it

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3
Q

demand schedule

A

a table that shows how much of a good or service an individual consumer is willing and able to purchase at each price in a market 9left-list various prices, right- quantity demanded)

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4
Q

market demand schedule

A

shows how much of a good or service all consumers are willing and able to buy at each price in a market

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5
Q

demand curve

A

a graph that shows how much of a good or service an individual will buy at each price

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6
Q

law of diminishing marginal utility

A

states that the marginal benefit from using each additional unit of a good or service during a given time period tends to decline as each is used

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7
Q

income effect

A

the term used for a change in the amount of a product that a consumer will buy because the purchasing power of his/her income changes

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8
Q

substitution effect

A

the pattern of behavior that occurs when consumers react to a change in the price of a good or service by buying a substitute product- whose price has not changed and that offers a better relative value

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9
Q

change in quantity demanded

A

a change in the amount of a product that consumers will buy because of a change in the price

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10
Q

demand schedule

A
  • business owners need infomation about consumer demand

- helps them price goods to the most sales

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11
Q

market research

A

gather and evaluate data about customer’s preferences

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12
Q

market demand curve

A
  • amount all consumers will buy at each price
  • constructed same way as individual demand curve
  • market demand curve includes all consumers of a product
  • quantities demanded are much larger than on individual demand curve
  • illustrates inverse relation between price and quantity demanded
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13
Q

law of diminishing marginal utility

A

-marginal benefits of each additional unit declines as each unit is used

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14
Q

income effect

A

amount people buy changes as purchased power if their income changes

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15
Q

substitution effect

A

amount people buy changes as they buy substititute products

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16
Q

change in quantity demanded

A

change in quantity demanded shown by movement to right or left along the curve

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17
Q

change in demand

A
  • change in demand is caused by a change in the marketplace
  • prompts people to buy different amounts at every price
  • also called shift in demand
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18
Q

1) income

A
  • a persons ability to buy goods changes as his or her income changes
  • as income of most consumers in a market change, so does total demand
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19
Q

normal goods

A

demanded more when consumers income rise

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20
Q

inferior goods

A

demanded less when consumers’ incomes rise

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21
Q

2) market size

A
  • as number of consumers in an area changes, so does market size
  • demand for most goods changes as market size changes
  • rise in population leads to increased demand
  • decrease in population leads to decreased demand
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22
Q

3) consumer tastes

A
  • consumer tastes change; products gain and lose popularity

- consumer demand a greater amount of popular items at ever price

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23
Q

4) consumer expectations

A
  • expectation about futire price of items affect individual behavior
  • expectated rise or fall in price can decide whether to buy now or wait mhm
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24
Q

5) substitute goods

A
  • products used in place of each other
  • if price of a substitute drops, people buy it instead of original item
  • if price of original item rises, people will buy more substitute
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25
6) complimentary goods
- goods used together - rise in demand for one increases the demand for the other - if a price of one product changes, demand for both changes in some way
26
supply
the willingness and ability of producers to offer goods and services for sale
27
law of supply
producers are willing to sell more of a good or service at a higher price than they are at a lower price
28
supply schedule
a table that shows how much of a good or service an individual producer is willing and able to offer for sale at each price in a market
29
supply curve
a graph that shows how much of a good or service an individual producer is willing and able to offer for sale at each price
30
marginal product
the change in total product that results from hiring one more worker
31
specialization
having each worker focus on a particular facet of producction
32
increasing returns
each new worker adds more total output than the last
33
diminishing returns
each new worker causes output to grow but at a decreasing rate
34
fixed costs
expenses that the owners of a business most incur whether they produce nothing, a little, or a lot
35
variable costs
business costs that vary as the level of production output changes
36
total cost
adding fixed and variable costs together
37
marginal cost
the additional cost of producing one more unit of their product
38
marginal revenue
the added revenue per unit of output, or the money made from each additional unit sold
39
total revenue
the income a business receives from selling a product
40
profit-maximizing output
when the marginal cost and the marginal revenue are equal
41
change in quantity supplied
an increase or decrease in the amount of a good or service that producers are willing to sell because of a price
42
change in supply
occurs when something prompts producers to offer different amounts for sale a every price
43
input costs
the price of the resources needed to produce a good or service
44
labor productivity
the amount of goods and services that a person can produce in a given time
45
technology
involves the application of scientific methods and discoveries to the production process, resulting in new products or new manufacturing
46
excise tax
a tax on the production or sale of a specific good or service
47
regulation
the act of controlling business behavior through a set of rules or laws, can also affect supply
48
elasticity of supply
a measure of how responsive producers to price changes
49
elasticity in demand
- buying habits affect by type of product and importance to consumer - measure of how responsive consumers are to price changes - goods with substitutes have elastic demand since choice are available
50
elastic
quantity demanded changes greatly as price changes
51
inelastic
goods or services not affected by price changes
52
unit elastic
same percentage change in price and quantity demand-useful concept for determining elasticity of demand
53
factors that affect elasticity of demand
- availibility of substitutes - proportion- of income spent on goods or services - whether product is necessity or luxury
54
what determines elasticity?
- substitute goods or services - proportion of income - necessity or luxury - calculating elasticity of demand - total revenue test
55
substitute goods or services
- if no substitute for a product, demand tends to be inelastic - when price of insulin goes up, diabetics still need the same amount - if there are substitutes for a prudct demand, it tends to be elastic - when price of beef goes up, consumers can buy other meats
56
proportion of income
- demand for expensive items fends to be elastic - if percentage of income needed to buy item increases - demand for inexpensive items tends to be inelastic - rise in price requires small additional part of income - rise in income can lead to greater demand for some goods or service
57
necessity or luxury
- necessity-something needed for life - demand for necessities is inelastic - luxury-something desired but not essential - demand for luxuries is elastic
58
calculating elasticity of demand
- knowing elasticity of demand tells sellers whether to cut price - if demand is elastic price cuts might increase earnings - if demand is inelastic, price cuts will not increase earnings - formulas used to calculate elasticity - is change in quantitiy demanded greater than change inprice
59
total revenue
amount of money company gets for selling its products | formula: TOTAL REVENUE = P (price) x Q (wuantity)
60
total revenue test
shows total revenue from item at various prices - if total revenue rises after price drops, demand is elastic - if total revenue falls after price drops, demand is inelastic
61
market supply
amount of product all producers are willing to sell
62
market supply curve
shows data from market
63
marginal product schedule
relation between labor and marginal product
64
variable cost
expenses that vary as level of output changes
65
factors that cause change in supply?
- input cost - labor productivity - technology - government action - producer expectations - number of producers
66
profit maximizing out put
lebel of production yielding highest profit

economics (6 decks)

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