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AP Macroeconomics > Section 2 Modules 5-9 > Flashcards

Section 2 Modules 5-9 Flashcards

1
Q

What is a competitive market? and how it is described by the supply and demand model?

A

a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is soldThe supply and demand model shows the behavior of the competitive market

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2
Q

What is a demand curve?

A

a graphical representation of demand schedule. It snows the relationship between quantity demanded and price

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3
Q

Demand Schedule

A

shows how much of a good or service

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4
Q

Market

A

group of producers and consumers who exchange a good or service for payment

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5
Q

Supply and Demand Model

A

model of how the competitive market works

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6
Q

Quantity Demanded

A

the actual amount of a good or service consumers are willing and able to buy at some specific

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7
Q

Demand Curve

A

a graphical representation of demand schedule. It snows the relationship between quantity demanded and price

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8
Q

Law of Demand

A

says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service

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9
Q

Change in Demand

A

is a shift of the demand curve, which changes the quantity demanded at any given price

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10
Q

Movement along the Demand Curve

A

a change in the quantity demanded of a good that is the result of a change in that good’s price

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11
Q

Substitutes

A

two goods are substitutes if a rise in a price of one of the goods leads to an increase in the demand for the other good

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12
Q

Complements

A

two goods complements if a rise in the price of one of the goods leads to a decrease in the demand for the other good

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13
Q

Normal Good

A

when a rise in income increases the demand for a good-the normal case- it is a normal good

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14
Q

Inferior Good

A

When a rise in income decreases the demand for a good, it is an inferior good

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15
Q

Individual Demand Curve

A

illustrates the relationship between quantity demanded and price for an individual consumer

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16
Q

Price Causation Factors

A

Income EffectsLower P (prices), purchasing power increaseHigher P, purchasing power decreasesSubstitution EffectLaw of Diminishing Marginal Utility

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17
Q

Demand

A

Inverse relationship b/w P and Q (quantity demand)

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18
Q

When will there be movement ALONG the curve?

A

If there is a change of P of the same good, that the change of Q will move it along the curve, not shift it.

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19
Q

Determinants of Demand: these cause a shift of the curve (5) TPEIP

A 
△taste
△population
△expectation
△income
△P of related goods (subs and comps)
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20
Q

What is the difference between movements along the supply curve and changes in supply

A

the shift in the supply curve are by the determinants of supply and the movement along the supply curve is the change of P of the same good.

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21
Q

Quantity supply

A

the amount of goods or services a producer is willing to sell at some specific price

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22
Q

Supply schedule

A

how much good or service producers will supply at different prices

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23
Q

Supply Curve

A

shows the relationship b/w Qs and P, basically graphs the supply schedule

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24
Q

Law of Supply

A

the direct relationship between Price and Quantity supply

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25
Q

change in supply and what are the factors that cause the shift

A

is a shift of the S curve in which the quantity supplied changes△ technology△ expectation of sellers△ # of suppliers (producers)△ P of related goods or services△ in input prices (resource prices)Taxes and government subsidies

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26
Q

Movement along the supply curve

A

A change in Qs on the curve of a good because a change of the SAME good’s price

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27
Q

Input

A

Anything that is used to produce a good or service

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28
Q

Individual supply curve

A

the relationships between Qs and P for an individual producer

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29
Q

Equilibrium

A

an economic situation in which no individual would be better off doing something different

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30
Q

equilibrium price

A

When Qs = Qd also known as the market clearing price

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31
Q

equilibrium quantity

A

the quantity of the good bought and sold at the equilibrium price is called the equilibrium quantity

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32
Q

Why does the market price fall if it is above the equilibrium price

A

Because there is a surplus there for Qs > Qd and bring the prices back down will make buyers buy the supply again because it will being towards back to equilibrium

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33
Q

Price about its equilibrium creates a ______

A

surplus

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34
Q

Surplus

A

of a good is when Qs > Qd because P is above the Equilibrium point

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35
Q

Shortage

A

when Qd > Qs because P is below the equilibrium point

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36
Q

Why does the market price rise if it is below the Equilibrium price

A

Because there is high demand so sellers can jack their price back up and it will bleed off the shortage and go back to equilibrium

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37
Q

Price below its Equilibrium level creates a ______

A

shortage

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38
Q

How equilibrium price and quantity are affected when there is a simultaneous change in both supply and demand

A

depends on graph

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39
Q

What happens when a demand curve shifts [7]

A

When the demand curve shifts to the right, meaning increase in demand, that means the prices go up and Qs goes up as well.When the demand curve shifts to the left, meaning D goes down, that means the Price goes down and the Qs goes down as well.

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40
Q

What happens when the supply curve shifts [7]

A

If the supply curve shifts to the left meaning Supply has gone down due to the determinants of supply, that means the Qs goes down, however P depends on how dramatically the supply goes down.Now if the supply shifts to the right meaning supply goes up, then P goes down (usually) and Qs goes up

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41
Q

Simultaneous shifts of Supply and Demand Curves

A

check the graph

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42
Q

Factors that shift supply Change in Input prices

A

If an input used to produce A rise, supply of A decreases to the leftIf P of input used to produce A falls then supply of A increases (shifts right)

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43
Q

Change in P of related goods or servicesIf A and B are substitutes in production

A

if price of B rises then supply of A decreasesif price of B falls then supply of A increases

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44
Q

Change of P of related goods or servicesIf A and B are complements in production

A

If price of B rises then supply of A increasesIf price of B falls then supply of A decreses

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45
Q

Changes in Technology

A

If technology used to produce A improves then supply of A increases

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46
Q

Changes in expectations

A

If price of A is expected to rise in the futures than supply of A decreasesIf price of A is expected to fall in the future than supply of A increases

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47
Q

Change in number of producers

A

If number of producers for A rises then supply of A increases

If number of producers falls for A then supply for A decreases

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48
Q

What is a competitive market? and how it is described by the supply and demand model?

A

a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is soldThe supply and demand model shows the behavior of the competitive market

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49
Q

What is a demand curve?

A

a graphical representation of demand schedule. It snows the relationship between quantity demanded and price

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50
Q

Demand Schedule

A

shows how much of a good or service

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51
Q

Market

A

group of producers and consumers who exchange a good or service for payment

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52
Q

Supply and Demand Model

A

model of how the competitive market works

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53
Q

Quantity Demanded

A

the actual amount of a good or service consumers are willing and able to buy at some specific

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54
Q

Demand Curve

A

a graphical representation of demand schedule. It snows the relationship between quantity demanded and price

How well did you know this?
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55
Q

Law of Demand

A

says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service

56
Q

Change in Demand

A

is a shift of the demand curve, which changes the quantity demanded at any given price

57
Q

Movement along the Demand Curve

A

a change in the quantity demanded of a good that is the result of a change in that good’s price

58
Q

Substitutes

A

two goods are substitutes if a rise in a price of one of the goods leads to an increase in the demand for the other good

59
Q

Complements

A

two goods complements if a rise in the price of one of the goods leads to a decrease in the demand for the other good

60
Q

Normal Good

A

when a rise in income increases the demand for a good-the normal case- it is a normal good

61
Q

Inferior Good

A

When a rise in income decreases the demand for a good, it is an inferior good

62
Q

Individual Demand Curve

A

illustrates the relationship between quantity demanded and price for an individual consumer

63
Q

Price Causation Factors

A

Income EffectsLower P (prices), purchasing power increaseHigher P, purchasing power decreasesSubstitution EffectLaw of Diminishing Marginal Utility

64
Q

Demand

A

Inverse relationship b/w P and Q (quantity demand)

65
Q

When will there be movement ALONG the curve?

A

If there is a change of P of the same good, that the change of Q will move it along the curve, not shift it.

66
Q

Determinants of Demand: these cause a shift of the curve (5) TPEIP

A

△taste△population△expectation△income△P of related goods (subs and comps)

67
Q

What is a competitive market? and how it is described by the supply and demand model?

A

a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold

The supply and demand model shows the behavior of the competitive market

68
Q

What is a demand curve?

A

a graphical representation of demand schedule. It snows the relationship between quantity demanded and price

69
Q

Demand Schedule

A

shows how much of a good or service

70
Q

Market

A

group of producers and consumers who exchange a good or service for payment

71
Q

Supply and Demand Model

A

model of how the competitive market works

72
Q

Quantity Demanded

A

the actual amount of a good or service consumers are willing and able to buy at some specific

73
Q

Demand Curve

A

a graphical representation of demand schedule. It snows the relationship between quantity demanded and price

74
Q

Law of Demand

A

says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service

75
Q

Change in Demand

A

is a shift of the demand curve, which changes the quantity demanded at any given price

76
Q

Movement along the Demand Curve

A

a change in the quantity demanded of a good that is the result of a change in that good’s price

77
Q

Substitutes

A

two goods are substitutes if a rise in a price of one of the goods leads to an increase in the demand for the other good

78
Q

Complements

A

two goods complements if a rise in the price of one of the goods leads to a decrease in the demand for the other good

79
Q

Normal Good

A

when a rise in income increases the demand for a good-the normal case- it is a normal good

80
Q

Inferior Good

A

When a rise in income decreases the demand for a good, it is an inferior good

81
Q

Individual Demand Curve

A

illustrates the relationship between quantity demanded and price for an individual consumer

82
Q

Price Causation Factors

A

Income Effects
Lower P (prices), purchasing power increase
Higher P, purchasing power decreases

Substitution Effect

Law of Diminishing Marginal Utility

83
Q

Demand

A

Inverse relationship b/w P and Q (quantity demand)

84
Q

When will there be movement ALONG the curve?

A

If there is a change of P of the same good, that the change of Q will move it along the curve, not shift it.

85
Q

Determinants of Demand: these cause a shift of the curve (5) TPEIP

A 
△taste
△population
△expectation
△income
△P of related goods (subs and comps)
86
Q

What is the difference between movements along the supply curve and changes in supply

A

the shift in the supply curve are by the determinants of supply and the movement along the supply curve is the change of P of the same good.

87
Q

Quantity supply

A

the amount of goods or services a producer is willing to sell at some specific price

88
Q

Supply schedule

A

how much good or service producers will supply at different prices

89
Q

Supply Curve

A

shows the relationship b/w Qs and P, basically graphs the supply schedule

90
Q

Law of Supply

A

the direct relationship between Price and Quantity supply

91
Q

change in supply and what are the factors that cause the shift

A

is a shift of the S curve in which the quantity supplied changes

△ technology
△ expectation of sellers
△ # of suppliers (producers)
△ P of related goods or services
△ in input prices (resource prices)

Taxes and government subsidies

92
Q

Movement along the supply curve

A

A change in Qs on the curve of a good because a change of the SAME good’s price

93
Q

Input

A

Anything that is used to produce a good or service

94
Q

Individual supply curve

A

the relationships between Qs and P for an individual producer

95
Q

Equilibrium

A

an economic situation in which no individual would be better off doing something different

96
Q

equilibrium price

A

When Qs = Qd also known as the market clearing price

97
Q

equilibrium quantity

A

the quantity of the good bought and sold at the equilibrium price is called the equilibrium quantity

98
Q

Why does the market price fall if it is above the equilibrium price

A

Because there is a surplus there for Qs > Qd and bring the prices back down will make buyers buy the supply again because it will being towards back to equilibrium

99
Q

Price about its equilibrium creates a ______

A

surplus

100
Q

Surplus

A

of a good is when Qs > Qd because P is above the Equilibrium point

101
Q

Shortage

A

when Qd > Qs because P is below the equilibrium point

102
Q

Why does the market price rise if it is below the Equilibrium price

A

Because there is high demand so sellers can jack their price back up and it will bleed off the shortage and go back to equilibrium

103
Q

Price below its Equilibrium level creates a ______

A

shortage

104
Q

How equilibrium price and quantity are affected when there is a simultaneous change in both supply and demand

A

depends on graph

105
Q

What happens when a demand curve shifts [7]

A

When the demand curve shifts to the right, meaning increase in demand, that means the prices go up and Qs goes up as well.

When the demand curve shifts to the left, meaning D goes down, that means the Price goes down and the Qs goes down as well.

106
Q

What happens when the supply curve shifts [7]

A

If the supply curve shifts to the left meaning Supply has gone down due to the determinants of supply, that means the Qs goes down, however P depends on how dramatically the supply goes down.

Now if the supply shifts to the right meaning supply goes up, then P goes down (usually) and Qs goes up

107
Q

Simultaneous shifts of Supply and Demand Curves

A

check the graph

108
Q

Factors that shift supply

Change in Input prices

A

If an input used to produce A rise, supply of A decreases to the left

If P of input used to produce A falls then supply of A increases (shifts right)

109
Q

Change in P of related goods or services

If A and B are substitutes in production

A

if price of B rises then supply of A decreases

if price of B falls then supply of A increases

110
Q

Change of P of related goods or services

If A and B are complements in production

A

If price of B rises then supply of A increases

If price of B falls then supply of A decreses

111
Q

Changes in Technology

A

If technology used to produce A improves then supply of A increases

112
Q

Changes in expectations

A

If price of A is expected to rise in the futures than supply of A decreases

If price of A is expected to fall in the future than supply of A increases

113
Q

Change in number of producers

A

If number of producers for A rises then supply of A increases

If number of producers falls for A then supply for A decreases

114
Q

What are price controls?

A

are legal restrictions on how high or low a market price may go, they can take two forms, a price ceiling or a price floor

115
Q

How does government intervene in markets?

A

they impose price controls

116
Q

Price Ceiling

A

a maximum price sellers are allowed to charge for a good or service

117
Q

Price floors

A

a minimum price buyers are required to pay for a good or service

118
Q

How can price controls create problems and make a market inefficient

A

.

119
Q

Why economists are often deeply skeptical of attempts to intervene in markets

A

.

120
Q

Who benefits and who loses in price controls and why they are used despite of well known problems

A

.

121
Q

Inefficient allocation to consumers

A

.

122
Q

Wasted Resources

A

.

123
Q

Ineffienctly low quality

A

.

124
Q

Black market

A

.

125
Q

Why are there price ceiling?

A

.

126
Q

Minimum Wage

A

.

127
Q

Ineffient allocation of sales among sellers

A

.

128
Q

Inefficiently high quality

A

.

129
Q

Increase in Demand (Graph)

P?
Q?

A

P Up

Q Up

130
Q

Increase in Supply (Graph)

P?
Q?

A

P Down

Q Up

131
Q

Decrease in Demand (Graph)

P?
Q?

A

P Down

Q Down

132
Q

Decrease in Supply (Graph)

P?
Q?

A

P Up

Q Down

133
Q

Increase in Demand/Increase in Supply(Graph)

P?
Q?

A

P Indet.

Q Up

134
Q

Increase in Demand/Decrease in Supply (Graph)

P?
Q?

A

P Up

Q Indet.

135
Q

Increase in Demand (Graph)

P?
Q?

A

P Indet.

Q Down

136
Q

Decrease in Demand/Increase in Supply

A

P Down

Q Indet.

137
Q

What is Elasticity

A

It means P sensitivity, if a good is elastic it means it has a lot of substitutes

If inelastic, then there are fewer substitutes

AP Macroeconomics (7 decks)

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