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Economics > Chapter 7-12 > Flashcards

Chapter 7-12 Flashcards

1
Q

Define Demand

A

the quanitity of a good or service that consumers are willing and able to buy at any given price.

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2
Q

Define quantity demanded

A

the amount consumers are willing and able to buy at A given price

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3
Q

What is the relationship between demand and price

A

inversely related

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4
Q

A movement along the demand curve is caused by what

A

Change in price

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5
Q

Shifts of the demand curve are caused by what?

A

anything other than price

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6
Q

Causes of changes in Demand (6)

A

Change in price of a substitute

Change in price of a complement

A change in income

Change in tastes, fashion, or advertising

Change in demographic

Advertising campaigns

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7
Q

Define supply

A

The quantity that suppliers are willing and able to sell at any given price

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8
Q

What is the relationship between price and supply

A

direct relationship

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9
Q

What is a movement along the supply curve caused by

A

changes in price of the good

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10
Q

What is a shift o fthe supply curve caused by

A

changes in anything other than price that affect supply

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11
Q

Causes of changes in supply (5)

A

Changes in costs

subsidies

taxes

weather, disaster and war

discovery/depletion of resources

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12
Q

What affects the changes in the cost (2)

A

Changes in the cost of FoP

Changes in producivity

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13
Q

Define Equilibrium price

A

price where quantity demand and quantity supply are equal

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14
Q

Define surplus

A

when quantity supplied is greater than quanitity demanded

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15
Q

Define shortage

A

when quantity demanded is greater than quanitity supplied

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16
Q

Define disequilibrium

A

when demand is not equal to supply

17
Q

What happens when there is a surplus?

A

producer lower price —> increase in demand and decrease in supply —> reach equilibrium

18
Q

What happens when there is a shortage?

A

Producer increase price —-> decrease in demand and increase in supply —-> reach equilibrium

19
Q

Define PED

A

A measure of responsiveness of quantitiy demanded to a change in price

20
Q

Define elastic demand

A

when quantitiy demanded changes by a greater percentage than the percentage change in price.

21
Q

Define inelastic demand

A

When quantitiy demanded changes by a smaller percentage than the percentage change in price

22
Q

Equation for PED

A

% change in QD/ % change in price

23
Q

What is it if PED > 1

A

elastic

24
Q

What is it if 0 < PED < 1

A

inelastic

25
Q

Determinants of PED (7)

A

Availability and closeness of substitutes

Proportion of income spent on the product

Luxury/necessity

Addiction/habits

Degree of brand loyalty

Ease and cost of swtiching to a substitute

How narrowly/broadly defined the marker is

26
Q

what are the 3 types of unique PED curves

A

Perfecly price inelastic

Perfecly elastic demand

Unitary elastic

27
Q

Equation for profit

A

profit = Revenue - cost

28
Q

Define revenue

A

the money a firm makes from sales

29
Q

Define PES

A

The responsiveness of supply to a change in price

30
Q

Equation for PES

A

% change in QS/ % change in price

31
Q

Define elastic supply

A

When the quantity supplied changes by a greater percentage than the percentage change in price

32
Q

Define inelastic supply

A

When the quantitiy supplied changes by a smaller percentage than the change in price

33
Q

What is it if 0 < PES < 1

A

Inelastic

34
Q

What is it if PES > 1

A

elastic

35
Q

Determinant of PES

A

Time taken to produce it

THe cost of changing supply

whether the good can be stored or not

36
Q

3 extreme versions of PES

A

perfecly elastic supply

perfecly ineslatic supply

unitary supply

37
Q

Applications of PES for decision making

A

Consumers want supply being elastic

Producers want supply being elastic

Government may be succesful giving subsidy if supply elastic

Economics (19 decks)

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