ECON: Unit 2: Ch 6 Flashcards

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1
Q

supply and demand related

A

AKA equilibrium price

  • when quantity demanded = quantity supplied
  • determined through demand and supply schedule where QS = QD, or demand and supply graph where the D curve and the S curve intersect
  • the equilibrium price can change
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2
Q

what happens to the price if the D curve shifts

A

Right…price increases

left…price decreases

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3
Q

what happens to the price if the S curve shifts

A

right. ..price decreases

left. .price increases

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4
Q

if the price is not at equilibrium…

A

above: there will be surplus, more supply than demanded
- the Price will be lowered to sell more goods
below: there will be a shortage, more demanded than supplied, the price will be raised until fewer people can afford it

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5
Q

demand schedule

A

consumers are willing to buy at various prices

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6
Q

supply schedule

A

sellers are willing to sell at various prices

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7
Q

equilibrium

A

balance between price and quantity

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8
Q

disequilibrium

A

quantity supplied does not equal quantity demanded

-can produce excess demand or excess supply

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9
Q

gov intervention to help disequilibrium

A

price ceiling: a maximum price that can be legally charged for a good ie rent control, to improve competition, prevent monopolies, make a good more affordable, creates shortage QD-QS
price floor: minimum for a good or service ie minimum wage, to encourage economic growth, will always be above market price, creates surplus QS-QD

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10
Q

factors of changes in market equilibrium

A

shift in entire demand curve or shift in entire supply curve

  • change in price: because of advance in technology, gov tax, subs, change of price of factors of prod
  • a shift in the supply curve will change the equilibrium price and quantity
  • changes as market conditions change
  • retailers are constantly searching for a new equilibrium and consumers recognize the searching by the frequent price changes, sales
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11
Q

finding a new equilibrium

A

if excess supply is present the price will fall to a point where QS = QD

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12
Q

a fall in supply…

A

ie a strike–increase the price, decrease in quantity demanded

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13
Q

changes in quantity demanded

A
  • can be rapid and unexpected
  • search costs: the financial and opportunity costs consumers pay in searching for a good or service ie driving, calling around
  • return to equilibrium by increasing or decreasing price
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14
Q

supply

A

the willingness and ability to produce a particular item at a specified price and time

  • Quantity supplied varies with price of item
  • is a direct relationship
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15
Q

law of supply

A
  • offer more supply at higher prices

- supplies will normally offer more for sale at higher prices and less at lower prices

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16
Q

quantity supplied

A

amount producers bring to market at any given price

  • change in amount offereed for sale in response to change in price
  • movement along supply curve
  • change in QS = change in price
17
Q

change in supply

A
  • cost of resources
  • productivity
  • technology
  • taxes, subsidies, regulations
  • expectations about future price, increase price is current decrease supply, decrease price is current supply increase
  • number of sellers
  • disasters
18
Q

elasticity of supply

A

measure of way in which quantity supplied responds to change in price

  • increase price is increase in output…elastic
  • increase price is decrease in output…inelastic
  • price is same as output…unit elastic
  • use coefficient method (%changeQS/%changeP)
19
Q

determinants of supply elasticity

A
  • nature of production
  • can adjust quickly to new prices= elastic
  • # of subs has no bearing on supply elasticity/ability to delay/portion of income `
20
Q

the production function

A

shows how output changes when amount of a single variable input changes while all other inputs are held constant

21
Q

stages of production

A
  1. increasing marginal returns: marginal product of each additional worker increases
  2. decreasing marginal returns: output increases at a diminishing rate as more variable inputs are added
  3. negative marginal returns: when marginal products of additional workers is negative
22
Q

marginal product

A

the extra output caused by adding one more unit of variable input

23
Q

measures of cost

A

fixed costs, variable costs, total cost, marginal cost

24
Q

fixed cost

A

AKA overhead

  • costs that an organization incurs even if there is little or no activity
  • ie salaries paid, interest, tax, gradual wear and tear on capital goods
25
Q

variable cost

A
  • costs that change when the business rate of operation or output changes
  • associated with labor and raw materials
  • typically largest cost is labor
26
Q

total cost

A

sum of fixed and variable cost

27
Q

marginal cost

A
  • extra cost incurred when producing 1 more unity of output

- more useful–more so than total cost because it helps with profit maximization