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Economy > Test 2 > Flashcards

Test 2 Flashcards

1
Q

Market (Under Capitalism)

A

A group of buyers and sellers of a particular good or service. The buyers determine the demand for the product
The sellers determine the supply of the product

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2
Q

Competitive market

A

A market in which there are so many buyers and sellers that each has very little impact on the market price

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3
Q

Perfectly Competitive

A

The goods offered for sale are all exactly the same

Buyers and sellers are so numerous that no one person can affect the market

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4
Q

Demand

A

The schedule of the quantity of a product which consumers are both willing and able to
buy at various prices

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5
Q

The Law of Demand

A

The quantity demanded of a good falls when the price rises

Raised prices, demand goes down

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6
Q

Demand Schedule

A

A table that shows the relationship between the price of a good and the
quantity demanded

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7
Q

Variables That Influence Demand?

A
  1. Income
  2. Price of related goods
  3. Taste (what people like)
  4. Expectations
  5. Number of Buyers
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8
Q

Supply

A

The schedule of the quantity of a product which producers are both willing and able to
produce and make available for sale at various prices

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9
Q

The Law of Supply

A

The quantity supplied of a good rises when the price of a good rises

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10
Q

Supply Schedule

A

A table that shows the relationship between the price of a good and the quantity supplied

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11
Q

Supply Curve

A

A graph of the relationship between the price of a good and the quantity supplied

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12
Q

Variables That Influence Supply

A
  1. Input Prices
  2. Technology
  3. Expectations
  4. Number of Sellers
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13
Q

Input Prices

A

The cost of producing the product

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14
Q

3 Situations That Are Represented on the Supply and Demand Graph

A
  1. Equilibrium
  2. Surplus
  3. Shortage
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15
Q

Equilibrium

A

A situation in which the market price has reached the level at which quantity
supplied equals quantity demand

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16
Q

Surplus

A

A situation in which quantity supplied is greater than quantity demanded

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17
Q

Shortage

A

A situation in which quantity demanded is greater than quantity supplied

18
Q

Types of Goods

A
  1. Normal Goods
  2. Inferior Goods
  3. Substitute Goods
  4. Complimentary Goods
  5. Independent Goods
19
Q

Normal Goods

A

Goods that people buy more of as their income increases

Clothing

20
Q

Inferior Goods

A

Goods that people buy less of as their income increases

Spam

21
Q

Substitute Goods

A

Two or more products that can be used for the same purpose

Fan and Air Conditioner

22
Q

Complimentary Goods

A

Products that are normally used together

Shoes and Shoelaces

23
Q

Independent Goods

A

Products that have no direct relationship with each other

24
Q

Utility

A

The ability of a product or service to satisfy some consumer want

25
Q

The Law of Diminishing Marginal Utilities

A

Within a limited time period, as an individual consumes

additional units of a product, that person will receive less additional satisfaction from the unit consumed

26
Q

Elasticity of Demand

A

Measure of how responsive consumers are with a change in price

27
Q

How do you compute the Price Elasticity of Demand?

A

Percentage change in quantity/

Percentage change in price

28
Q

What is considered elastic?

A

If the coefficient is more than 1

29
Q

What is considered inelastic?

A

If the coefficient is less than 1

30
Q

What is considered unitary?

A

If the coefficient is equal to 1

31
Q

Capital Assumption Allowance

A

That part of a given year’s production which is necessary to replace capital goods destroyed in generating that years production

32
Q

Cross Price Elasticity of Demand

A

The measure of how the quantity demanded of one good changes as the price of another good changes

33
Q

How to find Cross Price Elasticity of Demand

A

Percentage of the change of the quantity demanded of good #1/
Percentage of the change of quantity demanded of good #2

34
Q

Options when finding Cross Price Elasticity of Demand

A

It will either be:

  1. Positive (substitute goods)
  2. Negative (complementary goods)
35
Q

Income Elasticity of Demand

A

A measure of how much the quantity demanded of a good responds to a change in consumers income

36
Q

How to find Income Elasticity of Demand

A

Percentage in the change of the quantity demanded/

Percentage in the change of income

37
Q

Options when finding Income Elasticity of Demand

A

It will either be:

  1. Positive (normal goods)
  2. Negative (substitute goods)
38
Q

Price Elasticity of Supply

A

Measures how much the quantity supplied responds to the changes in
price

39
Q

How to find the Price Elasticity of Supply

A

Percentage in the change of quantity supplied/

Percentage in the change of price

40
Q

Options when finding the Price Elasticity of Supply

A

It will either be:

  1. Positive (elastic)
  2. Negative (inelastic)

Economy (8 decks)

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