Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

ECON.101 > midterm 2 > Flashcards

midterm 2 Flashcards

1
Q

what is the price elasticity of demand (PED)?

A

it measures how responsive the quantity demanded is to a change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what does PED>1 indicate?

A

elastic demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what does elastic demand mean?

A

consumers are very responsive to price changes (eg. luxury goods, non-essential items)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what does (PED<1) indicate?

A

inelastic demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what does inelastic demand mean?

A

consumers are less responsive to price changes (eg.necessities)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what does (PED=1) indicate?

A

unitary elastic demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what does unitary elastic demand mean?

A

a price change results in an equal percentage change in quantity demanded

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what is total revenue (TR)?

A

the total amount of money received by a firm from selling its product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what is the equation to solve for TR?

A

TR = Price x Quantity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

how does elastic demand impact TR?

A

lowering the price would increase TR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

how does inelastic demand impact TR?

A

raising the price would increase TR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

how does unitary elastic demand impact TR?

A

TR is unchanged when the price changes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what is cross elasticity?

A

measures how the quantity demanded of one good responds to a price change of another good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what does positive cross elasticity indicate?

A

goods are substitutes (eg. tea and coffee)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what does negative cross elasticity indicate?

A

goods are complements (eg. cars and gas)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what is income elasticity?

A

measures how the quantity demanded changes as consumer income changes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what impact do normal goods have on income elasticity?

A

positive income elasticity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

what impact do inferior goods have on income elasticity?

A

negative income elasticity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what does positive income elasticity mean?

A

demand increases as income rises

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

what does negative income elasticity mean?

A

demand decreases as income rises

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what is elasticity of supply?

A

measures how responsive the quantity supplied is to price change

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

what does an elastic supply indicate?

A

firms can easily increase production in response to price changes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what does an inelastic supply indicste?

A

firms find it difficult to increase production in response to price changes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

what is allocation?

A

refers to how goods and services are distributed in the market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
what is market allocation?
goods are allocated based on prices (supply and demand)
26
what is non-market allocation?
government or other entities control the distribution (eg. rationing)
27
what is consumer surplus?
the difference between what producers are willing to accept for a good and the price they actually receive
28
`what does consumer surplus represent?
the benefit consumers get from participating in the market
29
what equation solves for consumer surplus?
consumer surplus = willingness to pay - price paid
30
what is producer surplus?
the difference between what producers are willing to accept for a good and the price they actually receive
31
what does producer surplus represent?
the benefit producers receive from selling in the market
32
what equation solves for producer surplus?
producer surplus = price received - cost of production
33
how do you calculate market demand?
add individual demands at each price level to get the market demand
34
how do you calculate market supply?
add individual supplies at each level to get the market supply
35
when does DWL occur?
when the market is not in equilibrium (eg. due to price controls, taxes, monopolies, etc.)
36
what does deadweight loss (DWL) represent?
the lost economic welfare that could have been realized if resources were allocated efficiently
37
at what point is a competitive market efficient?
when it maximizes total surplus (consumer + market surplus)
38
what does a competitive market achieve at equilibrium?
allocative efficiency
39
what is allocative efficiency?
marginal benefit = marginal cost
40
what is utilitarianism?
maximize the total wellbeing of society
41
what is Rawls' Theory of Justice?
focus on improving the position of the least advantaged in society
42
what is fairness in rules vs fairness in outcomes?
debates whether fairness is about the fairness of the rules (procedural fairness) or the fairness of the outcomes (distributive fairness)
43
what is a price ceiling?
a maximum price set by the government (eg. rent control)
44
what happens if a price ceiling is set below the equilibrium price?
a shortage
45
what is a price floor?
a minimum price set by the government (eg. minimum wage)
46
what happens if a price floor is set above the equilibrium price?
a surplus
47
what is a shortage
when demand exceeds supply
48
what is a surplus?
when supply exceeds demand
49
what is a production quota?
a limit on the amount of a good that can be produced
50
why does canada's milk industry exercise production quotas
to regulate the economy
51
how do taxes impact supply and demand?
by increasing the cost of production or the price consumers pay
52
what is tax incidence?
refers to who bears the burden of the tax
53
when does tax incidence impact consumers (consumers pay)?
when the demand curve is inelastic
54
when does tax incidence impact producers (producers pay)?
when the supply curve is inelastic
55
what impact do taxes have on consumer-producer relations?
taxes create a wedge between the price consumers pay and the price producers receive
56
what does the deadweight loss from taxes represent?
the lost efficiency in the market
57
what is the impact when a country opens up to trade?
it imports goods at the world price
58
when do imports occur?
when the world price is lower than the domestic price
59
what impact do imports have on consumers?
consumers benefit from lower prices
60
what impact do imports have on domestic producers?
domestic producers are harmed because they face competition from cheaper imports
61
what impact do exports have on a country?
domestic producers sell their goods at the world price which may be higher than the domestic price
62
when do exports occur?
when the world price is higher than the domestic price
63
what impact do exports have on domestic producers?
domestic producers benefit from higher prices and expanded markets
64
what is a tariff?
a tax on imports that increases the price of foreign goods
65
what impact do tariffs have on domestic consumers?
they face higher prices
66
what impact do tariffs have on domestic producers?
they benefit because the price of foreign goods rises
67
how could a tariff result in DWL
if the tariff causes inefficiency and loss of total surplus
68
what is protectionism?
advocates for tariffs and trade barriers to protect domestic industries, create jobs, and ensure national security
69
what do critics argue about protectionism?
that it leads to higher prices, inefficiency, and retaliation from other countries
70
what is the formula to solve for price elasticity of demand?
(Q2 - Q1) / Q2 + Q1) ----------------------------- = PED (P2 - P1) / (P2 + P1)
71
what is the formula to solve for cross elasticity?
(Qx2 - Qx1) (Py2 - Py1) ---------------- / ---------------- = Exy Qx1 Py1
72
what is the formula to solve for elasticity of supply?
(Q1 - Q2) (P1 - P2) ------------- / --------------- x 100 = Es Q1 P1
73
what is marginal benefit?
the additional benefit a consumer receives from consuming one more unit of the good/service
74
what is the formula to solve for marginal benefit?
the change in total benefit (TB) when consumption increases ------------------------------------------------------ the chance in quantity (Q) consumed
75
what is marginal cost?
the additional cost incurred when producing one more unit of the good/service
76
what is the formula to solve for marginal cost?
change in total cost: TC1 - TC2 ------------------------------------------------------ change in quantity produced: Q1 - Q2
77

ECON.101 (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions