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Econ 201 > Topic 4 > Flashcards

Topic 4 Flashcards

1
Q

what is a market

A

a group of buyers and sellers
buyers determine the demand and sellers determine the supply

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2
Q

relative price

A

ratio of price to the price of its next best alternative

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3
Q

What is a competitive market

A

A single market with multiple sellers, no single seller can influence the price

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4
Q

Quantity demanded

A

Amount of a good or service a consumer is willing and able to purchase at any given price

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5
Q

What is the law of demand

A

The quantity demanded of good or service will decrease when the price increases

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6
Q

What is the demand schedule

A

A table that shows the relationship the price and quantity demanded

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7
Q

What is market demand

A

The sum of all individual demands for a good or service

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8
Q

What is the substitution effect

A

When the price of a good or service rises, consumers look for alternative options

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9
Q

Increase in demand

A

change in the demand
price stays the same
demand curve shifts to the right

opposite is true for a decrease in demand (left shift)

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10
Q

Income effect

A

When the price of a good rises relative to income consumers may not be able to pruchase the same quantities as before

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11
Q

What factors influence demand

A

Income
taste preferences
prices
demographics

expectations
future prices
future income
future availibility

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12
Q

factors that influence demand INCOME

A

normal good : an increase in income leads to an income in demand

Inferior good: increase in income leads to a decrease in demand

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13
Q

factors that influence demand PRICES

A

Substitutes : increase in price in one good increases the demand for alternative good

Complements : Increase in price of one good decreases the demand for another good

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14
Q

factors that influence demand TASTE

A

consumers tastes change, may buy more or less of the product

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15
Q

factors that influence demand DEMOGRAPHICS

A

larger the population, increases demand for all products
with respect to factors like age, race, gender

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16
Q

factors that influence demand EXPECTATIONS

A

future prices : an expected increase in the price tomorrow increases the demand today

Future income : an expected increase in income will increase demand

Product availibility: if consumers expect a shortage, demand increases today

NOTE opposites are true for each example

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17
Q

change in demand vs. change in qty demanded

A

change in quantity demanded : change in the price that causes a movement along the demand curve

Change in demand : any other change affecting the demand causes the entire demand curve to shift

18
Q

If a producer supplies a product then they

A

have the resources and tech to produce it
can profit from making it
has made a definite plan to produce and sell it

19
Q

What is quantity supplied

A

amount of good or service that a producer is willing and able to produce at a given price

20
Q

what is the supply schedule

A

a table that shows the relationship between price and quantity supplied

21
Q

what is the supply curve

A

a graph of the relationship between price and quantity supplied

22
Q

Law of supply

A

holding everything constant the quantity of a supplied good increases when the price increases

23
Q

law of supply graphs

A

quantity produced + = marginal cost +
MC= ^total cost / ^quantity

Quantity produced + = lowest price +

24
Q

what is market supply

A

the sum of supplies of all producers of a particular good or service
Any change that increases the quantity supplied at price changes shifts the supply curve right
Any change that reduces the quantity supplied at every price change shifts the curve left

25
Q

What factors influence market supply

A

input prices
tech
prices of related goods
number of other producers
state of nature

26
Q

what is input price

A

price of input + = supply of good -

27
Q

tech

A

advances create new products and lower cost of production
advances in tech + = supply of the good +

28
Q

prices of related goods

A

price of substitute + = supply of good -

29
Q

compliments

A

price of compliment + = supply of the good +

30
Q

numbers of producers

A

more suppliers = less demand

31
Q

expectations

A

future price + = supply -

32
Q

what is state of nature

A

all natural forces that affect production

33
Q

change in supply vs. change in quantity supplied

A

Quantity supplied : change in the price of a product, causes movement along the supply curve
Change in supply : any other change affecting the supply that causes the entire supply curve to shift

34
Q

what is market equilibrium

A

shows relationship between supply and demand
equilibrium = allocative efficiency

35
Q

how to deal with shortage and surplus

A

shortage = increase price to achieve equilibrium
surplus = decrease price to achieve equilibrium

36
Q

what is market equilibrium

A

when the quantity supplied and the quantity demanded are equal

37
Q

what is Equilibrium price

A

the price in which the quantity supplied = quantity demanded

38
Q

what is equilibrium quantity

A

the quantity supplied = the quantity demanded at equilibrium price
where supply curve intersects with demand curve

39
Q

shortage

A

quantity demanded > quantity supplied
price = lower than equilibrium price

40
Q

surplus

A

quantity supplied > quantity demanded
price = higher than equilibrium price

41
Q

law of supply and demand

A

states that the price of any good adjusts to bring the quantity supplied and quantity demanded into equilibrium

Econ 201 (6 decks)

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