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economics > chapter 4&5 test > Flashcards

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
Q

6) complimentary goods

A
  • 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
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26
Q

supply

A

the willingness and ability of producers to offer goods and services for sale

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27
Q

law of supply

A

producers are willing to sell more of a good or service at a higher price than they are at a lower price

28
Q

supply schedule

A

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
Q

supply curve

A

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
Q

marginal product

A

the change in total product that results from hiring one more worker

31
Q

specialization

A

having each worker focus on a particular facet of producction

32
Q

increasing returns

A

each new worker adds more total output than the last

33
Q

diminishing returns

A

each new worker causes output to grow but at a decreasing rate

34
Q

fixed costs

A

expenses that the owners of a business most incur whether they produce nothing, a little, or a lot

35
Q

variable costs

A

business costs that vary as the level of production output changes

36
Q

total cost

A

adding fixed and variable costs together

37
Q

marginal cost

A

the additional cost of producing one more unit of their product

38
Q

marginal revenue

A

the added revenue per unit of output, or the money made from each additional unit sold

39
Q

total revenue

A

the income a business receives from selling a product

40
Q

profit-maximizing output

A

when the marginal cost and the marginal revenue are equal

41
Q

change in quantity supplied

A

an increase or decrease in the amount of a good or service that producers are willing to sell because of a price

42
Q

change in supply

A

occurs when something prompts producers to offer different amounts for sale a every price

43
Q

input costs

A

the price of the resources needed to produce a good or service

44
Q

labor productivity

A

the amount of goods and services that a person can produce in a given time

45
Q

technology

A

involves the application of scientific methods and discoveries to the production process, resulting in new products or new manufacturing

46
Q

excise tax

A

a tax on the production or sale of a specific good or service

47
Q

regulation

A

the act of controlling business behavior through a set of rules or laws, can also affect supply

48
Q

elasticity of supply

A

a measure of how responsive producers to price changes

49
Q

elasticity in demand

A
  • 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
Q

elastic

A

quantity demanded changes greatly as price changes

51
Q

inelastic

A

goods or services not affected by price changes

52
Q

unit elastic

A

same percentage change in price and quantity demand-useful concept for determining elasticity of demand

53
Q

factors that affect elasticity of demand

A
  • availibility of substitutes
  • proportion- of income spent on goods or services
  • whether product is necessity or luxury
54
Q

what determines elasticity?

A
  • substitute goods or services
  • proportion of income
  • necessity or luxury
  • calculating elasticity of demand
  • total revenue test
55
Q

substitute goods or services

A
  • 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
Q

proportion of income

A
  • 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
Q

necessity or luxury

A
  • necessity-something needed for life
  • demand for necessities is inelastic
  • luxury-something desired but not essential
  • demand for luxuries is elastic
58
Q

calculating elasticity of demand

A
  • 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
Q

total revenue

A

amount of money company gets for selling its products

formula: TOTAL REVENUE = P (price) x Q (wuantity)

60
Q

total revenue test

A

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
Q

market supply

A

amount of product all producers are willing to sell

62
Q

market supply curve

A

shows data from market

63
Q

marginal product schedule

A

relation between labor and marginal product

64
Q

variable cost

A

expenses that vary as level of output changes

65
Q

factors that cause change in supply?

A
  • input cost
  • labor productivity
  • technology
  • government action
  • producer expectations
  • number of producers
66
Q

profit maximizing out put

A

lebel of production yielding highest profit

economics (6 decks)

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