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econ 1021 > econ > Flashcards

econ Flashcards

1
Q

circular-flow diagram

A

Helps to explain how participants in the economy interact with one another and helps to explain how the economy is organized

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2
Q

Demand Determinets

A
  1. price
  2. expectations
  3. tastes/preferences
  4. prices of related goods
  5. Income
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3
Q

why does a demand curve shifts left?

A

there is a decrease in demand

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4
Q

Why would a supply curve shift left?

A

If there is a decrease in the amount supplied

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5
Q

Normal good

A

an increase in income leads to an increase in demand, and a decrease in income leads to an decrease in demand

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6
Q

Inferior good

A

an increase in income leads to a decrease in demand, and a decrease in income leads to an increase in demand

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7
Q

Substitute goods

A

When the price of one increases, the demand for the other increases

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8
Q

Complement good

A

When the price of one increases, the demand for the other decreases

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9
Q

Supply Determinants

A
  1. Price of Inputs
  2. Technology
  3. Weather
  4. Number of Sellers
  5. Price of Related Goods
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10
Q

Goods with many close substitutes tend to have…

A

more elastic demands

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11
Q

Demand is said to inelastic if…

A

the quantity demanded changes only sighly when the price of the good changes (the good is a necessity)

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12
Q

Absolute advantage

A

If you can produce more of a good with the same amount (or less) of resources as someone else

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13
Q

Comparative Advantage

A

The situation where someone can produce a good at lower opportunity cost than someone else can

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14
Q

Monopsony

A

a market in which goods or services are offered by several sellers but there is only one buyer

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15
Q

Inelastic

A

Price elasticity of demand < 1
Increase the Price = Revenue Increase
Decrease the Price = Revenue Decrease

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16
Q

Unit elastic

A

Price elasticity of demand = 1
Increase or decrease the price and Revenue stays the same

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17
Q

Elastic

A

Price elasticity of demand > 1
Increase the Price = Revenue Decrease
Decrease the Price = Revenue Increase

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18
Q

Price elasticity of supply

A

(% change Quantity Supplied) / (% change in Price)

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19
Q

Cross Price elasticity

A

Negative # = complementary good
Positive # = supplementary good(substitutue)

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20
Q

Income Elasticity

A

Negative # = Normal good
Positive # = Inferior good

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21
Q

The burden of the tax falls on…

A

the buyers when demand is inelastic
the sellers when supply is inelasic

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22
Q

Common Resources

A

Goods that are rival in consumption but not excludable (Ex: fish in a pond, enviromental resources, etc,) .

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23
Q

Private Goods

A

Excludable, and Rival in Consumption (Ex. congested toll roads).

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24
Q

Tragedy of the Commons

A

A parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole

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25
Q

Marginal Cost (MC)

A

(Change in Total Cost) / (Change in Output)

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26
Q

Oligopoly

A

Few seller, many buyers

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27
Q

Marginal Revenue

A

(change in total revenue) / (change in quanity)

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28
Q

Max profit

A

MR=MC

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29
Q

Firms will shut down in the long run

A

price < AVC

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30
Q

Firms will exit the market in the long run when

A

P<ATC

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31
Q

Shift Supply for Labor

A

Change in Taste and Preferences
Alternative Opportunities
Immigration

32
Q

Marginal Cost (Formula)

A

ChangeTC/ChangeQ

33
Q

Price elasticity of demand

A

(% change in quanity demanded)/ (% change in price)

34
Q

Positive statement

A

claims that attempt to describe the world as it is (fact)

35
Q

Normative statement

A

claims that attempt to prescribe how the world should be (opinion)

36
Q

Perfect Competition

A

A market structure in which a large number of firms all produce the same product (many buyers and sellers)

37
Q

Monopoly

A

(economics) a market in which there are many buyers but only one seller

38
Q

% change in Price

A

(final - initial)/ (intitial) * 100

39
Q

Marginal Product

A

The increase in output that arises from an additional unit of input

40
Q

Monopolistic Competition

A

Many Buyers and many sellers

41
Q

Shift Demand for Labor

A

Demand for Output
Technology
a. labor saving
b. labor augmenting
Immigration (shift left)
Emmigration

42
Q

What question does scarcity not answer?

A

How can scarcity be eliminated?

43
Q

What does a market economy depend on market mechanisms to do?

A

determine the most efficient way of using resources

44
Q

How does a “command economy” compare to a “market economy”?

A

Production and distribution decisions are made by central planners in a command
economy, but not in a market economy.

45
Q

What tends to occur in countries with high labour costs?

A

They use more capital rather than labour in the production process.

46
Q

What is true about goods and services?

A

They flow in a counter-clockwise direction.

47
Q

What does the arrow from the product markets to the firms represent?

A

revenue

48
Q

What does the arrow from the firms to the product markets represent?

A

goods and services sold

49
Q

What does the arrow from the factor markets to the households represent?

A

money income

50
Q

What does the arrow from the firms to the factor markets represent?

A

wages, rent interest, and profits

51
Q

What is true about the production possibilities curve?

A

It is a graph that shows the various combinations of output it is possible for an economy to produce given its available resources and technology.

52
Q

What does the term “ceteris paribus” mean?

A

What is true for the individual is not necessarily true for the whole

53
Q

If individuals who sit in the back of the classroom receive lower grades on average than the rest of
the class, does that mean that sitting in the back of a classroom causes one to perform poorly on
exams?

A

The reoccurrence of a certain relationship between two variables does not
necessarily imply causation.

54
Q

fallacy of composition

A

the error of generalizing from the individual to the whole

55
Q

What is the difference between a positive economic statement and a normative one?

A

Positive economic statements are descriptive in nature, while normative economic
statements involve value judgments.

56
Q

Scarcity

A

Resources are insufficient to satisfy all human desires

57
Q

What is another term for economic resources?

A

factors of production

58
Q

Why is money NOT considered to be an economic resource?

A

Money is not directly used to produce goods and services.

59
Q

What causes a shift up and down a demand curve?

A

a change in the quantity demanded

60
Q

What causes a shift up and down a supply curve?

A

a change in the quantity supplied

61
Q

price floor

A

min legal price of a good

62
Q

price ceiling

A

max legal price of a good

63
Q

in a competitive market, how are prices determined?

A

by the interaction of many buyers and many sellers

64
Q

According to the law of demand, what happens as the price of a good increases?

A

Buyers desire to purchase less of it.

65
Q

If the demand for milk is downward sloping, then what will an increase in the price of milk result in?

A

a decrease in the quantity of milk demanded

66
Q

What do the income and substitution effects provide an explanation for?

A

why the demand curve is downward sloping

67
Q

Are markets always in equilibrium?

A

No, but if there is no outside interference, they tend to move toward equilibrium.

68
Q

What
is the result if the government imposes a price floor where quantity supplied is greater than quantity demanded?

A

Consumers will be able to purchase as many units as desired at that price.

69
Q

Hamburgers and fries are viewed by consumers to be complements. If the price of hamburgers falls,
what will happen in the market for fries?

A

The equilibrium quantity supplied will increase

70
Q

If Canadian consumers decided to boycott grapes to protest working conditions of farm workers,
everything else being equal, what can we expect?

A

The quantity supplied will fall

71
Q

Suppose Canada steps up efforts to combat drug trafficking and, with the aid of the U.S. border
patrol, intercepts a significant percentage of cocaine shipments. What will be the impact of this on
the market for cocaine in Montréal?

A

The supply of cocaine will decrease, causing the price of cocaine to increase

72
Q

What will the invention of machinery that can double the amount of gold extracted from raw ore
likely lead mining companies to do?

A

Lower the world price of gold because any given amount can now be produced
more cheaply.

73
Q

There is an increase in demand for personal computers at the same time their input costs fall. What
can we expect?

A

The quantity sold will increase, but the effect on price is uncertain.

74
Q

What action by the government will always cause a surplus?

A

when the government imposes a price floor above the equilibrium price

75
Q
A

econ 1021 (1 decks)

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