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Microeconomics > Exam Two > Flashcards

Exam Two Flashcards

1
Q

relationship between the quantity supplied of a particular good or service and the price

A

supply

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2
Q

specific amount of the good or service sellers are willing to offer for sale at a given price

A

quantity supplied

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3
Q

shows how much of a good would be supplied at different prices

A

supply schedule

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4
Q

shows relationship between quantity supplied and price

A

supply curve

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5
Q

price that matches quantity supplied and quantity demanded

A

equilibrium price

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6
Q

quantity bought and sold at equilibrium price

A

equilibrium quantity

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7
Q

when the quantity supplied exceeds the quantity demanded, when price is above equilibrium level

A

surplus

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8
Q

when the quantity demanded exceeds the quantity supplied, when price is below equilibrium level

A

shortage

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9
Q

price for all consumers and suppliers

A

market price

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10
Q

when the demand increases the
equilibrium price:
equilibrium quantity:

A

increases
increases

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11
Q

when the demand decreases the
equilibrium price:
equilibrium quantity:

A

decreases
decreases

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12
Q

when supply increases the
equilibrium price:
equilibrium quantity:

A

decreases
increases

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13
Q

when supply decreases the
equilibrium price:
equilibrium quantity:

A

increases
decreases

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14
Q

when demand decreases and supply increases the
equilibrium price:
equilibrium quantity:

A

decreases
is ambiguous

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15
Q

when the demand increases and supply decreases the
equilibrium price:
equilibrium quantity:

A

increases
is ambiguous

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16
Q

when demand and supply increase the
equilibrium price:
equilibrium quantity:

A

is ambiguous
increases

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17
Q

when demand and supply decrease the
equilibrium price:
equilibrium quantity:

A

is ambiguous
decreases

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18
Q

what does supply try to maximize

A

profit

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19
Q

what does demand try to maximize

A

satisfaction

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20
Q

difference between the maximum price consumers are willing to pay minus the price they actually pay

A

consumer surplus

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21
Q

total surplus

A

consumer surplus plus producer surplus

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22
Q

total surplus is a measure of

A

market efficiency

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23
Q

difference between the price received for a good and the minimum price sellers are willing to sell at

A

producer surplus

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24
Q

the actual cost of each unit in surplus is the

A

marginal costs based on opportunity cost

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25
Q

the maximum price at which a consumer would buy a good

A

willingness to pay

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26
Q

net gain to an individual buyer from the purchase of a good, difference between the buyer’s willingness to pay and the price paid

A

individual consumer surplus

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27
Q

sum of the individual consumer surpluses of all the buyers of a good in a market

A

total consumer surplus

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28
Q

both individual and total consumer surplus

A

consumer surplus

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29
Q

where is total consumer surplus on a graph

A

below the demand curve but above the price

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30
Q

lowest price at which a seller is willing to sell a good

A

seller’s cost

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31
Q

net gain to an individual seller from selling a good, difference between the price received and the seller’s cost

A

individual producer surplus

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32
Q

sum of the individual producer surpluses of all the sellers of a good in a market

A

total producer surplus

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33
Q

both individual and total producer surplus

A

producer surplus

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34
Q

where is total producer surplus on a graph

A

above the supply curve but below the price

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35
Q

as the price goes up, consumer surplus

A

decreases

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36
Q

as the price goes down, consumer surplus

A

increases

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37
Q

as price goes down, producer surplus

A

decreases

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38
Q

as price goes down, producer surplus

A

increases

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39
Q

decrease in total surplus caused by a decrease in equilibrium quantity

A

deadweight (social) loss

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40
Q

buyers and sellers meet at a specific price that benefits both

A

mutual gains

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41
Q

an efficient market allocates consumption of a good to potential buyers who

A

value it the most/are willing to pay the most

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42
Q

an efficient market allocates sales to potential sellers who

A

have the lowest cost

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43
Q

an efficient market ensures every consumer that buys a good values it

A

more than every seller who sells it

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44
Q

an efficient market ensures every potential consumer who does not buy a good values it

A

less than every potential seller who does not make a sale

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45
Q

rights of owners of valuable items to dispose of them as they choose

A

property rights

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46
Q

any piece of information that helps people make better economic decisions

A

economic signal

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47
Q

when some people could be made better without making other people worse off

A

inefficient

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48
Q

when a market fails to be efficient

A

market failure

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49
Q

type of market failure, when one firm can change the market price

A

market power

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50
Q

type of market failure, when actions have side effects on the welfare of others

A

externalities

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51
Q

type of market failure, when there are incomplete property rights

A

public goods and common resources

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52
Q

type of market failure, when there is wasted valuable human capital

A

discrimination

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53
Q

caveats to markets being efficient

A
  1. may not be fair/equitable
  2. only efficient under certain conditions (property rights, economic signals)
  3. not every individual is happy
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54
Q

side effects of actions that impose costs on or provide benefits for others but don’t have an economic incentive to take those costs or benefits into account

A

externalities

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55
Q

additional cost imposed on society as a whole by an additional unit of an externality

A

marginal social cost

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56
Q

additional gain to society as a whole by an additional unit of an externality

A

marginal social benefit

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57
Q

quantity of an externality that society would choose if all the costs and benefits were fully accounted for

A

socially optimal quantity

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58
Q

uncompensated cost that an individual or firm imposes on others

A

negative externality

59
Q

benefit that an individual or firm confers on others without receiving compensation

A

positive externality

60
Q

payment designed to encourage activities that yield external benefits

A

subsidy

61
Q

external benefit that results when knowledge spreads among individuals and firms

A

technology spillover

62
Q

good that supplier can prevent people who do not pay from consuming

A

excludable

63
Q

when a unit of a good cannot be consumed by more than one person at the same time

A

rival in consumption

64
Q

good that a supplier cannot prevent who do not pay from consuming it

A

nonexcludable

65
Q

when more than one person can consume the same unit of a good at the same time

A

nonrival in consumption

66
Q

excludable and rival in consumption

A

private good

67
Q

nonexcludable and nonrival in consumption

A

public good

68
Q

nonexcludable and rival in consumption

A

common resources

69
Q

excludable and nonrival in consumption

A

artificially scarce good

70
Q

with nonexcludable goods, many individuals are unwilling to pay for their own consumption and instead will use the good other people pay for

A

free-rider problem

71
Q

with common resources, individual uses a good until their marginal benefit is equal to their marginal cost, ignoring that this depletes the amount of resources remaining for others

A

overuse

72
Q

social cost of a negative externality

A

private cost plus external cost

73
Q

social benefit of a positive externality

A

private benefit plus external benefit

74
Q

a good continues to be produced until the marginal benefit of the last unit is

A

equal to the marginal cost

75
Q

what effect is caused by the free-rider problem

A

inefficiently low or high production

76
Q

type of market failure, when buyers and sellers do not have all the same information

A

private information

77
Q

when there is a set of rules and everyone follows the rules

A

fairness

78
Q

when not everyone has the same information

A

asymetrical information

79
Q

demonstrates what is happening with the internal costs/benefits

A

private curve

80
Q

legal restrictions on how high or low a market price may go

A

price controls

81
Q

maximum price sellers are allowed to charge for a good

A

price ceiling

82
Q

minimum price buyers are required to pay for a good

A

price floor

83
Q

what times do price controls usually happen

A

times of crisis

84
Q

inefficiency of price ceiling, some people that want the good badly are are willing to pay a high price don’t get it, someone who cares little and is willing to pay a low price gets it

A

inefficient allocation to consumers

85
Q

inefficiency of price ceiling, people expend money, effort, and time to cope with shortages

A

wasted resources

86
Q

inefficiency of price ceiling, sellers offer low quality goods at a low price even though buyers would prefer a higher quality at a higher price

A

inefficiently low quality

87
Q

inefficiency of price ceiling, market in which goods or services are bought and sold illegally

A

black market

88
Q

legal floor on the wage rate, market price of labor

A

minimum wage

89
Q

price floor that benefits low income farmers who are subject to heavy fluctuation of demand/supply

A

agriculture price supports

90
Q

inefficiency of price floor, quantity transacted is below the efficient level because the demand goes down and sellers cannot sell more goods than consumers are willing to buy

A

inefficiently low quantity

91
Q

inefficiency of price floor, sellers who are willing to sell at the lowest price do not make the sale, sellers who are willing to sell at a higher price do make the sale

A

inefficient allocation of sales among sellers

92
Q

inefficiency of price floor, unwanted surpluses are created and must be dealt with

A

wasted resources

93
Q

inefficiency of price floor, when sellers offer high quality goods at a high price even though buyers would prefer a lower quality at a lower price

A

inefficiently high quality

94
Q

for a price ceiling, the quantity exchanged is the quantity

A

supplied

95
Q

for a price floor, the quantity exchanged is the quantity

A

demanded

96
Q

price ceiling in the rental housing market

A

rent control

97
Q

how responsive consumers are to a change in price, ratio of percent change in the quantity demanded to the percent change in the price

A

price elasticity of demand

98
Q

when the price elasticity of demand is high, consumers are

A

very responsive to a change in price

99
Q

when the price elasticity of demand is low, consumers are

A

less responsive to a change in price

100
Q

when quantity demanded does not respond at all to changes in the price

A

perfectly inelastic demand

101
Q

what kind of line and number is perfectly inelastic demand

A

vertical line, 0

102
Q

when any price increase will cause the quantity demanded to drop to zero

A

perfectly elastic demand

103
Q

what kind of line and number is perfectly elastic demand

A

horizontal line, infinity

104
Q

what number is elastic

A

greater than 1

105
Q

what number is inelastic

A

less than 1

106
Q

what number is unit-elastic

A

equal to 1

107
Q

total value of sales of a good, equal to price times quantity sold

A

total revenue

108
Q

after a price increase, each unit sold sells at a higher price

A

price effect

109
Q

after a price increase, fewer units are sold

A

quantity effect

110
Q

in inelastic the quantity effect is

A

less than the price effect

111
Q

in elastic the quantity effect is

A

greater than the price effect

112
Q

with inelastic, when the price goes down the total revenue

A

goes down

113
Q

with elastic, when the price goes down the total revenue

A

goes up

114
Q

effect of the change in one good’s price on the quantity demanded of the other good

A

cross-price elasticity of demand

115
Q

how to find cross-price elasticity of demand

A

% change in quantity of A demanded/ % change in price of B

116
Q

in cross-price elasticity of demand, weak complements have a coefficient of

A

slightly less than zero

117
Q

in cross-price elasticity of demand, strong complements have a coefficient that is

A

very negative

118
Q

in cross-price elasticity of demand, close substitutes have a coefficient that is

A

positive

119
Q

percent change in quantity of a good demanded when a consumer’s income changes divided by the percent change in the consumer’s income

A

income elasticity of demand

120
Q

how to find income elasticity of demand

A

% change in quantity demanded/ % change in income

121
Q

in income elasticity of demand, when the coefficient is positive the good is

A

normal

122
Q

in income elasticity of demand, when the coefficient is negative the good is

A

inferior

123
Q

measure of the responsiveness of the quantity of a good supplied to the price of that good, ratio of the percent change in the quantity supplied to the percent change of the price

A

price elasticity of supply

124
Q

when the price of a good has no effect on the quantity supplied

A

perfectly inelastic supply

125
Q

what kind of line and number is perfectly inelastic supply

A

vertical line, 0

126
Q

when a small increase or reduction in price will lead to a very large change in quantity supplied

A

perfectly elastic supply

127
Q

what kind of line and number is perfectly elastic supply

A

horizontal line, infinity

128
Q

factors that determine price elasticity of supply

A

availability of inputs, time

129
Q

what does the quantity effect cause

A

total revenue to move in the same direction as quantity, elastic

130
Q

what does the price effect cause

A

total revenue to move in the same direction as price, inelastic

131
Q

at a high price a small change in price will result in

A

more responsiveness

132
Q

at a low price a small change in price will result in

A

less responsiveness

133
Q

necessities without no close substitutes are

A

inelastic

134
Q

luxuries that are easy to do without are

A

elastic

135
Q

if there are few alternatives to a good it is

A

inelastic

136
Q

if there are a lot of close substitutes/alternatives to a good it is

A

elastic

137
Q

if there is a more specific description of a good it is

A

elastic

138
Q

if there is a less specific description of a good it is

A

inelastic

139
Q

if more income is spent on a good it is

A

elastic

140
Q

if less income is spent on a good it is

A

inelastic

141
Q

if there has been more time since a price changed the good is

A

elastic

142
Q

if there has been less time since a price changed the good is

A

inelastic

143
Q

in income elasticity of demand, if the coefficient is more than one the good is

A

income elastic

144
Q

in income elasticity of demand, if the coefficient is less than one the good is

A

income inelastic

Microeconomics (7 decks)

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