Micro ~ Module 2: Demand and Supply Flashcards

1
Q

Define veblen goods

A

Consumers may view higher prices as a sign of better quality (Usually luxury goods).

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2
Q

Define speculative goods

A

When prices go up, investors may believe the prices will continue to increase and thus invest.

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3
Q

Define Demand (And Effective Demand)

A

The desire and willingness to purchase a product at a given price. (Effective demand is when you also have the ability).

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4
Q

Define normal goods and inferior goods

A

When income increases, demand for normal goods increases and demand for inferior goods decreases. And vice versa when income falls.

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5
Q

Define supply

A

Amount of product available to purchase at a given price.

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6
Q

Define profit incentive

A

If the price increases more profit can be made for each unit sold. This incentives entrepreneurs to expand production to increase profits.

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7
Q

Define the costs of production

A

The cost of all the inputs required to make a good.

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8
Q

Define direct tax and indirect tax

A

A direct tax is a tax which is paid directly from an individual to the government, e.g Income tax. Whilst an Indirect tax is a tax which is not paid directly to the government by an individual. e.g Expenditure taxes.

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9
Q

Define ad valorem tax and unit tax (examples of indirect taxes)

A

Ad Valorem tax = the tax paid at a percentage of the price of the product. (VAT rates = 20%)
Unit Tax = the same amount of tax is paid for each unit produced. (Alcohol Duty)

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10
Q

Define excess demand and excess supply

A

When there is either a higher quantity of demand over supply, or supply over demand.

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11
Q

Define negative equity

A

An asset worth less than its purchase price

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12
Q

Define derived demand

A

Demand for a good which is used in the production of another good. (Demand of one good increases, mean the demand for the other good increases as well)

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13
Q

Define composite demand

A

Demand for a good which has two uses.

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14
Q

Define joint supply

A

Supply of one good also leads to the supply of another good.

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15
Q

Define consumer surplus

A

The difference between what a consumer is willing and able to pay for a good or service and actually pay it.

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16
Q

Define producer surplus

A

The difference between how much the producer is willing and able to supply a good or service and they actually get paid.