Economics Flashcards
Three general areas of economics
1) Microeconomics
2) Macroeconomics
3) International Economics
What causes a change in the demand curve (a shift of demand curve)
A shift in demand curve is caused by changes in factors other than price
When a demand schedule is plots on a graph the resulting demand curve will be?
Negatively sloped
What are the slopes of the individual and market demand curves?
Negative
What does a change in price do for the supply curve?
It changes quantity supplied, which is a movement along the supply curve not a shift.
The slope of a supply curve is?
Positive
For the supply curve a shift to the left is?
An inward movement
Movements of supply curve
Inward (left) - increase in cost of production
Outward (right) - decrease in cost of production
What is market equilibrium?
When market supply is equal to market demand
What is the elasticity of demand formula?
%change in quantity/% change in price
What is unitary elasticity?
When elasticity of demand/supply is equal to 1
As an individual acquires or consumes more units of a commodity over a given time period what happens with total and marginal utility?
Marginal utility decreases and total utility increases
Law of Diminishing Returns
Concerned with cost of production. As more units of a variable input are added to fixed inputs, a point is reached at which the continued addition of variable knots results in decreasing output per unit of variable input.
The average fixed cost curve is not U shaped. True or false?
True. Average total fixed cost drops as quantity increases.
Which cost curves have a general U shape?
Average variable cost curve, marginal cost curve, average total cost curve.
What are the four most common market structures used for economic analysis?
1) Perfect competition
2) Perfect Monopoly
3) Monopolistic Competition
4) Oligopoly
In perfect competition price is always equal to?
Marginal revenue
When do firms in perfectly competitive and perfect monopolistic environment produce?
Where MR=MC
How do you calculate the gross domestic product deflator?
(Nominal GDP/real GDP)X100
Consumer Price Index
Relates prices paid by consumers for a basket of goods and services during a period to the price of basket in a prior reference period. Looks at one changes.
Used by federal government to measure inflation
Where is aggregate equilibrium?
Where AS=AD
Wholesale Price Index
Relates prices paid for a basket of raw materials, intermediate and finished goods purchased by businesses to a prior reference period
Preventative measure for deflation?
Increase money supply, your goal is to stimulate demand
Comparative advantage is closely linked to ?
The difference in opportunity costs
