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Ecenomics > Semester 2 Test 1 > Flashcards

Semester 2 Test 1 Flashcards

0
Q

What is the law of demand?

A

Law of demand is the cheaper something is, the more of it we will buy.

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1
Q

What is demand?

A

Demand is the desire to own something and the ability to pay for it.

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2
Q

What is the substitution effect?

A

The substitution effect takes place when a consumer reacts to a rise in the price of one good by consuming less of that good and more of a substitute good.

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3
Q

What is the income effect?

A

The income effect occurs when the change in consumption results from a change in income.

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4
Q

What is a demand schedule?

A

A demand schedule is a table that lists the quantity of a good that a person will purchase at each price in a market.

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5
Q

What is a market demand schedule?

A

A market demand schedule is a table that lists the quantity of a good all consumers in a market will buy at each different price.

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6
Q

What is a demand curve?

A

Demand curve is a graphic representation of a demand schedule

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7
Q

What is a normal good?

A

Normal good - a good that consumers demand more of when their incomes increase.

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8
Q

What is an inferior good?

A

Inferior good: a good that consumers demand less of when their income increases.

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9
Q

What are compliments?

A

Complements: two goods that are bought and used together.

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10
Q

What are substitutes?

A

Substitutes: goods used in place of one another

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11
Q

What is elasticity of demand?

A

Elasticity of demand: a measure of how consumers react to a change in price.

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12
Q

What is inelastic?

A

Inelastic: not very sensitive to price change

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13
Q

What is Elastic?

A

Elastic: sensitive to price change.

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14
Q

What is the elasticity formula?

A

Elasticity formula: take the percentage change in the demand of a good, and divide this number by the percentage change in the price of the good.

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15
Q

What is unitary elastic?

A

Unitary elastic: describes demand whose elasticity is exactly equal to one.

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16
Q

What is total revenue?

A

Total revenue: the total amount of money a firm receives by selling goods or services

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17
Q

Where does elastic demand come from?

A

Elastic demand comes from one or more of these factors:

  1. availability of substitute goods
  2. a limited budget that does not allow price changes
  3. the perception of the good as a luxury item
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18
Q

What is supply?

A

Supply: the amount of goods available

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19
Q

What is the law of supply?

A

Law of supply: the tendency of suppliers to offer more of a good at a higher price.

20
Q

What does quantity supplied refer to?

A

The term quantity supplied is used to described how much of a good is offered for sale.

21
Q

What is a supply schedule?

A

A supply schedule shows the relationship between price and quantity supplied for a specific good.

22
Q

What is a market supply schedule?

A

A market supply schedule is all of the supply schedules of individual firms in a market.

23
Q

What is elasticity of supply?

A

Elasticity of supply is a measure of the way suppliers respond to a change in price.

24
Q

What is the marginal product of labor?

A

Marginal product of labor: the change in output from hiring one additional unit of labor.

25
Q

What does it mean to increase marginal returns?

A

Increasing marginal returns is a level of production in which the marginal product of labor increases as the number of workers increase.

26
Q

What does it mean to diminish marginal return?

A

Diminishing marginal returns is a level of production in which the marginal product of labor decreases as the number of workers increases.

27
Q

What are fixed and variable costs?

A
  • Fixed costs: a cost that does change, no matter how much of a good is produced.
  • Variable costs: a cost that rises or falls depending on how much is produced.
28
Q

What is a total cost?

A

Total costs is the total of the fixed and variable costs added together.

29
Q

What is marginal cost?

A

•The additional cost of producing one more unit is the marginal cost.

30
Q

What is operating cost?

A

Operating cost: the cost of operating a facility.

31
Q

What is a subsidy?

A

A subsidy is a government payment that supports a business or market

32
Q

What is an excise tax?

A

•An excise tax is a tax on the production or sale of a good.

33
Q

What is equilibrium?

A

Equilibrium is the point of balance between price and quantity.

34
Q

What is disequilibrium?

A

Disequilibrium occurs when quantity supplied is not equal to quantity demanded in a market.

35
Q

What is excess demand?

A

Excess demand occurs when quantity demanded is more than quantity supplied.

36
Q

What is excess supply?

A

Excess supply occurs when quantity supplied exceeds quantity demanded.

37
Q

Give examples of price ceiling and price floor

A
  • Rent control is an example of a price ceiling.

* Minimum wage is an example of a price floor.

38
Q

What is a supply shock?

A

•Supply shock is a sudden shortage of a good.

39
Q

What is rationing?

A

Rationing is when goods are allocated using criteria other than price.

40
Q

What is a black market?

A

The black market is a forum for illegal goods.

41
Q

What is perfect competition?

A

Perfect competition is a market structure in which a large number of firms all produce the same product.

42
Q

What are the four conditions of perfect competition?

A
    1. Many buyers and sellers participate in the market.
    1. Sellers offer identical products.
    1. Buyers and sellers are well informed about products.
    1. Sellers are able to enter and exit the market freely.
43
Q

What is a commodity?

A

A product that is considered the same regardless of who makes or sells it is called a commodity.

44
Q

What are barriers to entry?

A

Barriers to entry are factors that make it difficult for a new firm to enter a market.

45
Q

What are start-up costs?

A

Start-up costs are expenses that a firm must pay before it can begin to produce and sell goods.

46
Q

What is a monopoly?

A

A monopoly forms when barriers prevent firms from entering a market that has a single supplier.

47
Q

What are economies of scale?

A

Economies of scale: factors that cause a producer’s average cost per unit to fall as output rises.

Ecenomics (2 decks)

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