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Economics - 2018 > Study Guide for Test 2 (Chapters 4-5) > Flashcards

Study Guide for Test 2 (Chapters 4-5) Flashcards

1
Q

Marginal Utility

A
  • The amount of satisfaction that results from a one unit increase of a product tends to be smaller with each additional unit
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2
Q

Value in Exchange

A
  • What a particular good is worth in exchange for some other good
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3
Q

Total Utility

A
  • The total amount of satisfaction received from possessing a particular amount of a good
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4
Q

Value in Use

A
  • Value that is directly related to the benefits their owners receive through their use
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5
Q

Substitute Good

A
  • A good capable of being used in place of another
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6
Q

Durable Good

A
  • Goods that are expected to last at least three years
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7
Q

Complementary Good

A
  • A good often used in conjunction with another
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8
Q

Nondurable Good

A
  • Goods that have a life expectancy of less than three years
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9
Q

Substitution Effect

A
  • Indicates that people tend to substitute less expensive goods for ones whose prices have risen
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10
Q

Income Effect

A
  • When the price of a good falls, consumers tend to buy more of that good or of other items because they can do so without giving up anything
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11
Q

Supply

A
  • The relationship between a good’s price and the amount that producers are willing to provide for consumers
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12
Q

Demand

A
  • The relationship between a good’s price an the amount that people are willing to buy
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13
Q

Consumers

A
  • People who use goods
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14
Q

Profit Motive

A
  • The desire to work to improve one’s economic situation
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15
Q

Demand Curve

A
  • A graphic representation of the quantity of goods purchased at different prices
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16
Q

Inferior Goods

A
  • Demand for these items decreases as consumer’s incomes increase and vice versa
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17
Q

Price Floor

A
  • Price levels set above the equilibrium prices
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18
Q

Public Sector

A
  • Controlled by national, state, and local governments
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19
Q

Elastic

A
  • If the price goes up, people will buy less

- Price Elasticity of Demand

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20
Q

Inelastic

A
  • If consumers pay really high prices on a particular commodity because they feel there are no substitutes
21
Q

Income Effect

A
  • Says that when the price of a good falls, consumers tend to buy more of that good or of other items because they can do so without giving up anything
22
Q

Depreciation

A
  • The diminishing of the value of goods that is caused by wear and time
23
Q

Equilibrium

A
  • The point at which quantity demanded and quantity supplied are equal
24
Q

Equity

A
  • The total value of a business minus any liabilities
25
Q

Market

A
  • A mechanism that allows people to exchange goods
26
Q

Market Price

A
  • Prices at which goods can be sold in an open market with many potential sellers and buyers
27
Q

Market Signals

A
  • Signs that are used by consumers an producers to determine how much of a good to buy or sell at a given price or time
28
Q

Opportunity Costs

A
  • The value of the best alternative that is foregone when a different alternative is taken
29
Q

Price

A
  • The amount of money that a buyer pays a seller for a good
30
Q

Profit

A
  • The excess of the total revenue paid by the buyers for goods over the seller’s total expense of producing these goods
31
Q

Shortage

A
  • A situation in which the quantity demanded exceeds the quantity supplied at a given price
32
Q

Surplus

A
  • A situation in which the quantity supplied exceed the quantity demanded at a given price
33
Q

Law of Demand`

A
  • The free market principle stating that as the price of a good increases, the quantity demanded decreases, assuming other factors remain equal
  • As the price of a good falls, the quantity demanded rises
34
Q

Law of Supply

A
  • The free-market principle stating that as the price of a good increases the quantity supplied also increases, assuming other factors remain equal
  • As the price of a good falls, the quantity supplied also falls
35
Q

Demand Schedule

A
  • A list of numbers that compares price with quantity demanded
36
Q

Supply Curve

A
  • A graphic representation of the quantity of goods supplied at different prices within a specified amount of time
  • Slopes upward and to the right
37
Q

Normal Good

A
  • A good whose demand is directly related to the consumer’s incomes
38
Q

Subsidies

A
  • Monetary assistance given given by government to a business to encourage production
39
Q

Price Ceiling

A
  • A limit that the government places on how high a producer may charge for his product
  • Price level set below the equilibrium price
40
Q

Private Sector

A
  • That part of an economy controlled by private individuals, businesses, and organizations
41
Q

Traditional Economy

A
  • An economic system in which decisions involving the production, distribution, and consumption of goods are based upon custom, heredity, and cause
42
Q

Black Market

A
  • An illegal, underground system for the exchange of goods developed to avoid governmental regulations
43
Q

Command Economy

A
  • Economic system in which a centralized authority controls production, distribution, and consumption of goods, as well as savings, investments, and prices
  • Also called a planned or directed economy
44
Q

Diminishing Marginal Utility

A
  • The principle stating that as one’s supply of a specific good or service increases, the satisfaction derived from each additional unit tends to decrease
45
Q

Free Enterprise Economy

A
  • System in which people are free to make their own economic choices
  • Also called market economy
46
Q

Five Factors of Changes in Demand

A
  1. Tastes and Preferences
  2. Income
  3. Population
  4. Prices of Related Goods
  5. Consumer Expectations
47
Q

Six Factors of Changes in Supply

A
  1. Technology
  2. Resource Prices
  3. Prices of Relate Goods
  4. Number of Sellers
  5. Producer Expectations
  6. Government Taxes, Subsidies, and Regulations
48
Q

Do businesses in the free market economy make big profits?

A
  • NO
  • Competition
  • Other Costs

Economics - 2018 (8 decks)

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