Econ Ch. 3-4 Test Flashcards

1
Q

States that people tend to receive less and less addition satisfaction from any good or service as they obtain more and more of it during a specific period of time

A

Principle of Diminishing marginal utility

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2
Q

of units of a product that will be bought at a given price, amount of something not only wanted, but also purchased

A

Demand

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3
Q

States that everything else being held constant, the lower the price charged for a good or service, the greater the demand; the higher the price, the lower the demand

A

Law of Demand

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4
Q

T/F Demand Curve goes top left to bottom right

A

True

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5
Q

Prices serve to…. (3 things)

A

1) Transfer Information
2) Provide Incentives
3) Circulate Income

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6
Q

T/F In a free market, prices are unspoken agreements between buyers and seller

A

True

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7
Q

Situation where the change in price of an item causes a change in the demand (movement occurs along the previously established curve)

A

Change in quantity demanded

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8
Q

Shifting of a demand curve when demand for an item increases or decreases regardless of price (whole curve shifts left or right)

A

Change in Demand

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9
Q

4 things that can change demand

A

1) Change in people’s income
2) Price of related goods
3) Change in people’s taste
4) Change in expectations

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10
Q

Increase in demand moves a curve to the…

A

right

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11
Q

Decrease in demand moves the curve to the…

A

left

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12
Q

Items for which demand typically increase when buyers income increases

A

Normal goods (ex. cars, movies, clothes)

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13
Q

items that typically experience a decrease in demand as buyers income increases

A

Inferior goods (ex. off brand, ramen noodles)

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14
Q

Items that resemble one another and may be used in place of eachother

A

Substitute Goods (ex. Dasani and Great Value, BK and McDonald’s, Pepsi and Coke)

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15
Q

Items usually purchased/used together

A

Complementary Goods (ex. ketchup and mustard, PB & J, hot dogs and buns, cereal and milk)

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16
Q

Compromise between buyer and seller (expensive enough for Business to make money, cheap enough for consumer to buy)

A

Market Price

17
Q

Amount of goods/services business firms are willing and able to provide at different prices

18
Q

The higher the price buyers are willing to pay, other things constant, the greater the quantity of a product a firm will produce; the lower the price consumers are willing to pay, the smaller the quantity the supplier will produce

A

Law of Supply

19
Q

Which way does a supply curve go?

A

Bottom left to top right

20
Q

Change in price consumers are willing to pay, causes a change in the number of goods made and sold (causes movement along curve)

A

Change in quantity supplied

21
Q

Business firm produces more or less despite price (causes whole curve to shift left or right)

A

Change in Supply

22
Q

Things that cause supply to change (3)

A

1) Change in Technology
2) Change in production cost
3) Change in price of related goods
(see notes for examples)

23
Q

Point at which consumers are willing to purchase from market the exact quantity of a product suppliers put in (point where the market is happy :))

A

Market Equilibrium

24
Q

Price where market equilibrium occurs

A

Market Equilibrium Price

25
Excess of unsold products, occurs when supplier raises prices above market equilibrium
Surplus
26
3 solutions to a surplus
1) Increase Demand 2) Decrease Supply 3) Allow price to fall to market equilibrium point
27
When government buys surplus commodities to raise prices it results in a
price floor (barrier intended to prevent prices of items from falling below market price)
28
When various factors hold price of a good below market equilibrium
Shortage
29
Does not allow certain prices to go above market equilibrium
Price Ceiling (if the ceiling holds the price too low for too long, it suffocates profit, and businesses die)
30
3 solutions to a shortage
1) decrease demand 2) increase supply 3) allow prices to raise to market equilibrium point