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Econ 260 > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

The law of demand suggests a _____ relationship between price and ______.

A

Negative, Quantity demanded

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2
Q

Consumer surplus is the amount that consumers

A

are willing to pay for a good minus what they actually pay for it.

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3
Q

The supply curve shows the relationship between:

A

price and quantity supplied.

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4
Q

An increase in supply refers to a what kind of shift in the supply curve:

A

a rightward shift of the supply curve.

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5
Q

When the price of inputs increase, how does the supply curve respond.

A

the supply curve shifts up and to the left

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6
Q

A decrease in the opportunity cost of steel production will:

A

make suppliers more likely to produce steel, thus shifting the supply curve down and to the righ

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7
Q

An increase in demand shifts the demand curve:

A

to the right

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8
Q

If the demand for good A increases when the price of good B increases, then good A and good B are:

A

Substitutes

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9
Q

Consumer surplus on the graph

A

Above price line and below demand curve

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10
Q

Producer surplus on the graph

A

Below price line and above supply curve

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11
Q

Anonymity on the Internet has lowered the cost of rudely confronting people. What has happened to the supply of rude confrontations?

A

The supply has increased, shifting down and to the right

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12
Q

A decrease in demand shifts the demand curve

A

to the left

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13
Q

The quantity supplied:

A

is the amount that sellers are willing and able to sell at a particular price.

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14
Q

The law of supply reflects a _____ relationship between price and quantity ______

A

positive, supplied

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15
Q

An increase in a per unit production tax ______ supply.

A

decreases

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16
Q

Out of the following which does not shift demand?

  • Population
  • Price
  • Expectations
  • Income
A

Price

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17
Q

A decrease in the price of one substitute good causes the demand curve of the other good

A

To shift to the left

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18
Q

As the price of a good increases:

A

it becomes profitable to produce more of the good even with higher costs of production.

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19
Q

An increase in the future expected price of a storable good ________ supply.

A

Decreases

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20
Q

** If market demand decreases (affect on equilibrium price and equilibrium quantity) **

A

equilibrium price and quantity will both decrease.

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21
Q

** If market supply increases: (affect on equilibrium price and equilibrium quantity) **

A

equilibrium price will decrease but equilibrium quantity will increase.

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22
Q

When a market is competitive:

A

buyers compete with other buyers, raising prices, and sellers compete with sellers, lowering prices.

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23
Q

** If market demand increases (affect on equilibrium price and equilibrium quantity) **

A

an increase in both the equilibrium price and the equilibrium quantity

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24
Q

In the market for a normal good, an increase in income will cause an increase in ______, an increase in quantity ______, and a(n) ______ in price.

A

demand; supplied; increase

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25
Q

A decrease in supply causes the equilibrium price to ______ and equilibrium quantity to ______.

A

rise; fall

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26
Q

Which of the following events will cause a decrease in the equilibrium price?

  • a government tax on output
  • a decrease in income for an inferior good
  • an increase in the price of a substitute good
  • lower input prices
A

lower input prices

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27
Q

If demand decreases, ceteris paribus, market price will be ______ at the new equilibrium point.

A

lower

28
Q

How did the spread of the Internet affect the market for news (regardless of source)?

A

Supply increased, causing the price to fall.

29
Q

How did the spread of the Internet affect the market for newspapers?

A

Demand decreased, causing the price to fall.

30
Q

When you move along a demand curve:

A

all non-price determinants of demand are held constant.

31
Q

When the price of a good increases, demand for the good will:

  • increase
  • decrease
  • unaffected
  • depends on supply
A

-Unaffected. Remember the the quantity demanded will increase, not the demand.

32
Q

The elasticity of demand measures

A

how much less of a good or service consumers will buy when the price increases.

33
Q

To examine how responsive consumers are to price changes, economists measure

A

the elasticity of demand.

34
Q

The fundamental determinant of the elasticity of demand for a good is

A

how easy it is to substitute the good for another.

35
Q

If the demand for a good is inelastic, then what is the result of price increase?

A

The revenue will increase

36
Q

The elasticity of supply measures

A

how quantity supplied responds to price changes.

37
Q

The demand for most goods tends to become ______ over time.

A

more

38
Q

The supply of a good tends to be more elastic if production can be

A

expanded without causing a big increase in the price of its inputs.

39
Q

Relationship between price INCREASE, elasticity, and revenue.

A

Elastic: Reduces revenue
Inelastic: Increases revenue

40
Q

Relationship between price DECREASE, elasticity, and revenue.

A

Elastic:Increases revenue
Inelastic: Reduces revenue

41
Q

Supply tends to be ________ in local markets, and ________ in global markets.

A

elastic, inelastic

42
Q

If the cross-price elasticity of demand of two goods is negative, we can conclude that the two goods are:

A

complements

43
Q

The question of who pays the greater amount of a commodity tax is determined by:

A

the relative elasticities of demand and supply.

44
Q

Whether a buyer or a seller pays more of a commodity tax depends on:

A

their relative price elasticities.

45
Q

The difference between what buyers pay for a unit of a good and what sellers receive is known as the

A

Tax

46
Q

Who bears the majority of burden in the case of a state cigarette tax?

A

Buyers

47
Q

Commodity taxes impose a ______ upon society.

A

Deadweight loss

48
Q

When the maximum legal price is below the market price we say that there is a price:

A

Ceiling

49
Q

For a price floor to prevent market forces from finding the equilibrium price it must be set:

A

above the equilibrium price, causing a market surplus.

50
Q

A price ceiling causes a

A

shortage

51
Q

If a minimum wage is posted in the labor market:

A

a surplus of labor would develop.

52
Q

A price floor is

A

a minimum price allowed by law

53
Q

Price floors cause a

A

surplus

54
Q

The most common example of a price being controlled above market levels involves a good for which the:

A

Seller outnumbers the buyer

55
Q

The presence of price floors in a market usually is an indication that:

A

sellers of the good or service outnumber the buyers.

56
Q

Price ceiling is

A

a maximum price allowed by law

57
Q

What are the 5 shift factors of demand

A
  • # of buyers
  • Price of other goods
  • Income
  • Expectations of future prices
  • Taste and preferences
58
Q

Reading a supply curve horiz. and vert.

A

Vert: Marginal cost to produce a good
Horiz: Amount firm will supply at given price

59
Q

Reading a demand curve horiz. and vert.

A

Horiz: How much people demand at given price
Vert: Marginal benefit of a unit

60
Q

What are the 4 shift factors of supply

A
  • Cost of production
  • Number of sellers
  • Expectations
  • Price of other goods
61
Q

What is producer surplus?

A

Difference between firms get and the marginal cost

62
Q

Elastcity equation

A

% change in quantity / % change in price

63
Q

Values of elasticity

A

E < 1 = inelastic

E > 1 = elastic

64
Q

Income, good elasticity

A

Normal good = E > 0

Inferior good = E < 0

65
Q

Substitutes and compliments elasticity

A 
Substitutes = E > 0
Compliments = E < 0

Econ 260 (5 decks)

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