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Micro > group 2 > Flashcards

group 2 Flashcards

1
Q

what does a PPF show

A

the maximum productive potential using a combination of two goods where resources are used fully and efficiently

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2
Q

what can a PPF show

A

the opportunity cost between two scarce resources

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3
Q

different points on the PPF

A

on the line-maximum productive potential
outside-impossible
inside-not producing at productive potential

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4
Q

movement along the PPF curve

A

producing more of one scarce resource and less of the other

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5
Q

PPF and economic growth

A

graph before:
constant rate of technology
all resources are used fully and efficiently

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6
Q

capital goods

A

goods that can be used to make other goods

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7
Q

consumer goods

A

goods which cannot be used to make other goods

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8
Q

productively efficient

A

when all resources are being used to their maximum productive potential

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9
Q

allocative efficiency

A

All goods and services are optimally distributed among the economy

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10
Q

what is demand

A

the total amount of goods and services that consumers are willing and able to buy at a given price during a given period of time

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11
Q

movement along demand curve

A

as price decreases and quantity increases, this is an expansion. as price increases and quantity decreases, this is a contraction

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12
Q

shift of the demand curve

A

shift outward, higher q at same price.
shift inward, lower q at the same price

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13
Q

factors determining demand shifts

A

populations
income
related goods
advertising
tastes and fashion
expectations
seasons

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14
Q

diminishing marginal unity

A

when one good is consumed, its marginal unity decreases. therefore consumption decreases

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15
Q

what is PED and its equation

A

the responsiveness of a change in quantity demanded to its change in price

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16
Q

price inelastic

A

when the change in price leads to a a smaller change in quantity demanded. PED<!

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17
Q

price elastic

A

when the change in price leads to a larger change in quantity demanded. PED>1

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18
Q

unitary elastic

A

when the change in price leads to the exact same change in quantity demanded. PED=1

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19
Q

perfectly inelastic

A

when the change in price does not lead to a change in quantity demanded. PED=0

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20
Q

perfectly elastic

A

when the change in price leads to the quantity demanded being 0. PED= infinity

21
Q

factors affecting PED

A

necessity, substitutes, addiction and habit, proportion of income, durability, peak and off-peak

22
Q

elasticity of demand and tax revenue

A

if the government imposes a tax, the consumers and the firms take the burden

23
Q

tax revenue with inelastic goods

A

can increase the price for inelastic goods and impose tax on consumer-beneficial for increasing tax revenue

24
Q

tax revenue with elastic goods

A

you cannot impose tax as much on consumers as increasing price will affect the quantity demanded by more
beneficial for reducing the demand of a good

25
Q

income elasticity of demand

A

the responsiveness of a change in quantity demanded to a change in income. YED=change in QD/change in income

26
Q

inferior, normal and luxury goods

A

inferior goods- as income increases, demand for this good decreases. YED<0
normal goods- as income increases, demand for this good increases, YED>0
luxury goods-as income increases, demand for this good increases even more, YED>1

27
Q

cross elasticity of demand

A

responsiveness of a change in quantity demand of one good to a change in price of another good

28
Q

substitutes XED

A

strong- as the price of one good increases, the quantity demanded of the other good increases by a Loy
weak-as the price of one good increases, the quantity demanded of the other good increases but by not as much

29
Q

complementary goods XED

A

strong- as the price of one good increases, the quantity demanded of the other increases by more
weak- as the price of one good increases, the quantity demanded for the other doesn’t increase as much

30
Q

unrelated goods

A

XED= 0

31
Q

subsidy

A

a payment granted by the government to firms in order to increase the production of a specific good

32
Q

what is supply

A

the total amount of goods and services a producer is willing and able to supply at a given price during a given time period

33
Q

movements along the supply curve

A

expansion:increase in P leading to an increase in QD
contraction: decrease in P leading to a decrease in QD

34
Q

factors determining shifts of the supply curve

A

productivity
indirect tax
number of firms
technology
subsidy
weather
costs of production
depreciation in er

35
Q

price elasticity of supply with equation

A

the responsiveness of a change in supply to a change in price PES=change in quantity supplied/change in price

36
Q

elastic supply

A

firms can change the supply quickly and cheaply

37
Q

inelastic supply

A

it is expensive and long for firms to change supply in response to change in price

38
Q

perfectly inelastic supply

A

supply cannot be changed, PES=0

39
Q

perfectly elastic supply

A

firms can change the supply without changing price

40
Q

factors determining PES

A

time scale
sparce capacity
level of stock
subsidies
how substitutional
barriers into market

41
Q

when is the market in equilibrium

A

when demand = supply

42
Q

excess demand

A

price is below p1
shortage supply so goods become more expensive and firms supply more

43
Q

excess supply

A

above p1
firms decrease price of goods and demand will match supply

44
Q

types of interrelations

A

demand:derived, composite, joint
supply:joint

45
Q

derived demand

A

when the demand of one good is derived from another i.e. demand of bricks derived from the demand of houses

46
Q

composite demand

A

when the demand of one good has more than one use i.e. milk with cheese and butter

47
Q

joint demand

A

when the demand of one good is linked to another such as digital cameras and SD cards

48
Q

joint supply

A

when the increase in supply of one good leads to either increase or decrease of another

Micro (5 decks)

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