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Microeconomics > ssss > Flashcards

ssss Flashcards

1
Q

When is productive efficiency achieved?

A

This is achieved in an economy when it is not possible to make anyone better off without making someone worse off, you cannot produce more of one good A without producing less of good B.

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2
Q

What are the factors influencing PED

A

Necessity
Availibility of substitutes
Addiction
% of income spent on good

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2
Q

What is allocative efficiency?

A

It occurs when the available economic recources are used to produce the combination of goods and services that best matches peoples tastes and preferences.

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2
Q

What is producer surplus?

A

The difference between the price producers are willing and able to supply a good and the price they actually recieve.

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2
Q

What is the definition of a complementary product

A

A good which is consumed with another

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3
Q

What are the factors affecting the price elasticity of supply?

A

-Time
-Raw materials need to be found, extracted and processed.
-Availibility of stocks or stock-piling
-The ease of switching between alternative production
-availibility of spare capacity
-Ability to alter production methods

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3
Q

What is the definition of demand?

A

Demand is the amount that consumers are willing and able to buy at each given price point.

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3
Q

What are production possibility boundaries?

A

Indicates the maximum possible output that can be achieved given a fixed set of recources and tech in a particular time period.

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4
Q

When is demand income elastic

A

answers above 1 or less than 1

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4
Q

Define cross price elasticity of demand

A

A measure of the responsiveness of qunatity demanded of one good to a change in the price of another good.

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4
Q

What is producer surplus the measure of?

A

The measure of the welfare producers gain from producing goods and services.

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4
Q

What is consumer surplus?

A

The difference between the total amount that people are willing and able to pay for a good or service (demand curve) and the total amount they actually do pay (market price).

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5
Q

What is price elasticity of demand?

A

Measures the responsiveness of quantity demanded to a change in the price of the good

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6
Q

What is composite demand

A

A good that is demanded for more than one purpose so that an increase in demand for one purpose reduces the supply for the other purposes e.g. land

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7
Q

What is equilibrium?

A

The price at which demand is equal to supply and there is no tendency for change.

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7
Q

What are the determinants of supply - (things which shift supply).

A

-cost of raw materials
-technological improvements
-changes in labour productivity
-regulation and bereaucracy
-wage rates
-subsidies
-indirect taxes
-expectations about future prices
-objectives of firms
-number of sales in the market
-joint supply

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7
Q

What is disequilibrium in the long run?

A

The shortage returns to equilibrium

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7
Q

What is consumer surplus the measure of?

A

The measure of welfare (benefits) that people gain from consuming goods and services.

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8
Q

What are positive statements?

A

-Tested using evidence
-objective
-fact based

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9
Q

What is derived demand?

A

When the demand for one good or services comes from the demand for another good or service. That is, the good is a component of the other good.

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9
Q

What happens to total revenue when PED is elastic

A

a fall in price will increase total revenue

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10
Q

Describe what positive numbers mean for YED

A

the good is a normal good, the higher the number, the more luxurious the good

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10
Q

When PED is between 0 and -1

A

price inelastic demand
When prices fall, quantity demanded increases but at a smaller proportion than the fall in price.

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11
Q

What is economics the study of?

A

Economics is the study of the allocation of scarce recources within a society.

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11
Q

When PED > 1

A

A greater proportion of quantity than price when price falls.
A price elastic good is responsive to a change in price.

11
Q

What is a trade off?

A

In order to produce more capital goods, there is a trade off in consumer goods.

11
Q

What is a commodity?

A

A good that is traded, but usually refers to raw materials or semi manufactured goods that are traded in bulk.

11
Q

Describe what negative numbers mean for YED

A

means the good is an inferior good, the lower the negative, the crappier the good

12
Q

What does the demand curve look like and explain the concept of extensions and contractions of demand.

A

A quantity of Q1 is demanded.
* At a lower price of P2, a higher quantity is demanded (Q2) - this is called an extension in demand
* At a higher price of P3, a lower quantity is demanded (Q3) - this is called a contraction of demand

12
Q

What is XPED when it is < 1

A

Weak substitute

13
Q

When PED = 0

A

Perfectly inelastic
When price changes there is no effect on quantity demanded at all

14
Q

Where is productive efficiency on the PPB?

A

Anywhere on the line

15
Q

What is XPED when it is > 1

A

Strong substitute

15
Q

What is disequilibrium in the short run?

A

When quantity demanded is greater than the quantity supplied.

15
Q

What happens to total revenue when PED is 0

A

when prices fall, because quantity demanded does not change at all, total revenue must fall

16
Q

What are the factors that shift PPB left?

A

-Emigration
-War
-Disease
-Disaster

16
Q

IN XPED, are substitutes positive or negative

A

Always positive.

17
Q

What are value judgements?

A

Opinions.

18
Q

What is supply?

A

The amount offered for sale by produces at each given price level.

19
Q

Formula for PeS

A

% change in quantity supplied / % change in price.

20
Q

What happens to total revenue when PED is infinity

A

A change in price will eliminate all demand for the product

21
Q

What is the definition of a inferior good

A

As income rises, demand falls

21
Q

What is PRice elasticity of supply?

A

Measures the responsiveness of quantity supplied to changes in the price.

21
Q

What is opportunity cost?

A

Benefit given up of the next best alternative.

22
Q

What are normative statements?

A

Value judgements
can not be tested

23
Q

What is the definition of a substitute

A

A good that can be used in place for another good

24
Q

In XPED, what are complements

A

Always negative.

25
Q

What is the definition of a normal good

A

As income rises, demand rises

26
Q

When PED is -1

A

Unitary elastic good
Change in price brings about the same proportionate change in quantity demanded

26
Q

What happens to total revenue when PED is between 0 and -1

A

when prices fall, total revenue will fall

27
Q

What is Income elasticity of demand

A

Measures the responsiveness of quantity demanded to a change in income

28
Q

When PED is infinity

A

Perfectly elastic
demand is infinite at a specific price.

28
Q

When is demand income inelastic

A

Between 0 and 1 or 0 and -1

28
Q

What is homogenous

A

Unbranded.

28
Q

What is the formula for XPED

A

% Change in quantity demanded of good A / % change in price of good B

29
Q

What are weak complements in XPED

A

Between 0 and -1

30
Q

What are strong complements in XPED

A

less than -1

31
Q

What 6 factors makes the demand curve shift.

A
  • Population - larger pop = higher demand
  • Income - more disposable income = buy more goods = demand increases.
  • Related goods - e.g. a substitute increases price, demand will rise for competitors
  • Advertising - increases consumer loyalty and increase demand
  • Tastes and fashions
  • Expectations and consumer confidence.
32
Q

Joint supply is ..

A

where an increase in the supply of one good leads to an increase in the supply of a by-product.

33
Q

What are the factors that shift PPB right

A

-Investment in new/nore tech
-Intro of new recources
-Increased supply of labour
-Improvements in human labour through training
-Encouraging entrepreneurship
-Increased productivity

34
Q

What is productive efficiency?

A

It is capacity or where production is greatest (producing the most, using the least)

Microeconomics (7 decks)

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