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Spring Semester > Econ 101 Exam 2 > Flashcards

Econ 101 Exam 2 Flashcards

1
Q

As Price increases, the Quantity Demand decreases

A

Law of Demand

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2
Q

A general measure of responsiveness

A

Elasticity

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3
Q

The response of 1 valuable to changes in another valuable

A

Elasticity

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4
Q

Measures the responsiveness of QD to changes in the P

A

Price Elasticity of Demand

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5
Q

The % change in QD resulting from a 1% change in P

A

Price Elasticity of Demand

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6
Q

ED = ______/________

A

%change in QD/% change in P

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7
Q

ED= ______ - ________ / ______

A

new - old / old

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8
Q

When any event shifts S or D the equilibrium in the market ______.

A

changes

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9
Q

Compare old equilibrium to a new equilibrium

A

Comparative Statictics

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10
Q

Ed is always ______ because of the law of demand

A

negative

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11
Q

|ED| _____ as move down a linear, downturned-sloping D curve

A

decreases

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12
Q

Buyers + Sellers _____ prices up and down (like an auction)

A

‘bid’

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13
Q

There is only one price where _______ = _______

A

Quantity Supply = Quantity Demand

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14
Q

Equilibrium = _______ = ________

A

Quantity Supply = Quantity Demand

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15
Q

Equilibrium is also known as “________”

A

Market clearing price

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16
Q

There is _______ to change in equilibrium

A

no tendency

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17
Q

At any P not = to P*, QS _____ DS and there is disequilibrium

A

does not =

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18
Q

Excess supply

A

Surplus

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19
Q

Excess demand

A

Shortage

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20
Q

If P > P*, then QS _____ QD

A

>

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21
Q

There is _________ on the P + QS decreases and QD increases until QS = QD

A

downward pressure (surplus)

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22
Q

In a shortage there is ______ on the P.

A

upward pressure

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23
Q

3 Categories of ED:

A

1.Elastic Demand
2. Inelastic Demand
3. Unit Elastic Demand

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24
Q

|ED| > 1

A

Elastic

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25
Q

|ED| < 1

A

Inelastic

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26
Q

|ED| = 1

A

Unit Elastic

27
Q

%change in QD > %change in P

A

Elastic

28
Q

%change in QD < %change in P

A

Inelastic

29
Q

%change in QD = %change in P

A

Unit Elastic

30
Q

What is this an example of?
Ex.- A 10% increase in P, 20% decrease in QD

A

Elastic Demand

31
Q

What is this an example of?
Ex.- A 10% increase in P, 5% decrease in QD

A

Inelastic Demand

32
Q

What is this an example of?
Ex.- A 10% increase in P, 10% decrease in QD

A

Unit Elastic

33
Q

ED is especially important to _______ because changes in P affect their Total Revenue.

A

Producers

34
Q

Total amount you receive from selling a good or service

A

Total Revenue

35
Q

TR = _____ x ______

A

Price x Quantity

36
Q

When P increases TR _____

A

increases

37
Q

As the P increases, QD decreases, so sell fewer units = TR ______

A

decreases

38
Q

What happens to TR when P increases?

A

Depends on ED

39
Q

What does TR equal if Tacos cost $2 and you sell 125 of them?

A

2 x 125 = 250

40
Q
  • Straight line D curve
  • Constant slope
  • ED varies
A

Linear Demand Curve

41
Q

Don’t classify a demand curve as _______.

A

elastic or inelastic

42
Q

Don’t confuse slope for _______

A

Elastic

43
Q

ED = infinity / small

A

Perfectly Elastic Demand

44
Q

Consumers don’t tolerate changes in P, assuming perfect substitutions

A

Perfectly Elastic Demand

45
Q

When P changes consumers may not buy at all.

A

Perfectly Elastic Demand

46
Q

ED = 0

A

Perfectly Inelastic Demand

47
Q

Price is no object, QD does not change when P changes

A

Perfectly Inelastic Demand

48
Q

ED = 0 until a certain price

A

Perfectly Inelastic Demand

49
Q

Availability of Substitutes = ED is _______

A

greater; more elastic

50
Q
  • More substitutes available
  • More similar the substitutes are
A

ED is greater (more elastic)

51
Q

ED is greater (more elastic) depends on ____

A

how the market is defined (narrow or broad)

52
Q

Narrow def. = more subs,
so ED is ______

A

more elastic

53
Q

Broad def. = less Subs,
so ED is ______

A

less elastic

54
Q

What are these examples of?
Ex.- bananas, jeans, chicken, and Ben & Jerry’s

A

Narrow Def.

55
Q

What are these examples of?
Ex.- fruit, meat, clothes, ice cream

A

Broad Def.

56
Q

If a good is a large part of budget and P increases, ______

A

More elastic

57
Q

Necessity = ______

A

inelastic

58
Q

Luxury = _____

A

elastic

59
Q

longer periods of time = _____

A

more elastic

60
Q

If a 5% increase in price leads to an 8% decrease in quantity demanded, demand is _______

A

elastic

61
Q

If a firm raises the price of its product, its total revenue will _______

A

increase only if demand is price inelastic

62
Q

Demand is elastic whenever price elasticity has an absolute value_______ 1

A

greater than

63
Q

A perfectly elastic demand curve is _______.

A

a horizontal straight line

64
Q

Consumers have a long time to adjust to a price change which makes the demand _____

A

more elastic

Spring Semester (28 decks)

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