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AP Micro > Unit 2 > Flashcards

Unit 2 Flashcards

1
Q

Law of Demand

A

High price = less quantity demand
Less Price = More quantity demand

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2
Q

Law of supply

A

price increases = quantity supplied increase
prices decreases = quantity supplied decreases

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3
Q

Quantity demanded

A

amount of good or service consumers are willing to buy at some specific price

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4
Q

quantity supplied

A

amount of good or service producers are willing to sell at some specific price

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5
Q

demand curve

A

graph that shows relationship between Q.D. and price

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6
Q

supply cure

A

graph that shows relationship between Q.S. and price

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7
Q

equilibrium price

A

quantity demanded = quantity supplied

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8
Q

diminishing marginal utility

A

as a person increases consumption of something, the more times they have it, the less marginal utility they derive from consuming it

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9
Q

income effect

A

As one’s income grows, the income effect predicts that people will begin to demand more (and vice-versa).
income decreases people will demand less

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10
Q

substitution effect

A

How a change in price of a good affects demand compared to others.
If price of apples rises, consumers will substitute apples for other goods like bananas

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11
Q

market demand

A

total quantity of a product that consumers are willing and able to buy at a given price within a market

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12
Q

demand schedule

A

A list or table showing how much of a good
or service, consumers will want to buy ät different prices

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13
Q

supply schedule

A

list showing ow much of a good producers will supply at diff prices

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14
Q

change in income

A

increase in income, increase in the amount of normal goods bought
DEMAND curve for NORMAL goods shifts RIGHT
DEMAND curve for INFERIOR goods shifts LEFT
decrease in income, increase int he amount of inferior goods bought
DEMAND curve for NORMAL goods shifts LEFT
DEMAND for INFERIOR good shifts RIGHT

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15
Q

substitute

A

pairs of good for which a rise in the price of one leads to an increase in demand for the other

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16
Q

complementary goods

A

Complementary goods are products that increase in value when the demand for relative products increases. For example, if the demand for cell phones increases, the demand for cell phone chargers might also increase.

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17
Q

market supply

A

total amount of an item producers are willing and able to sell at different prices over a given period of time

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18
Q

shift on a graph

A

Shifts occur due to changes in demand and supply for goods or services caused by different factors like changes in consumers income

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19
Q

movement on a graph

A

change in the price of a good results in a movement

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20
Q

price elasticity of demand

A

through the lens of consumers
% change in quantity demanded/% change in price

21
Q

determinants for demand

A

available close substitutes: really elastic
necessity vs. luxury
% of budget (higher %, more elastic)
Time to adjust to prices
(don’t have time: inelastic
more time: elastic)

22
Q

elasticities

A

Unit elastic = 1
Elastic = >1, changes a lot due to price changes
Inelastic = <1, barely going to change due to price

23
Q

perfectly elastic demand

A

the case in which any price increases will cause the quantity demanded to drop to zero; the demand curve is a horizontal line

24
Q

perfectly inelastic demand

A

the case in which the quantity demanded does not respond at all to changes in the price; the demand cure is a vertical line

25
Q

price elasticity of supply

A

through firms lens
price change sensitive to quantity supplied

%change in Q.S./ % change in price

26
Q

determinants

A

more alternate inputs of an object = elastic
less = inelastic
time: the longer you have the more elastic it becomes

27
Q

elastic supply

A

Situation where any change in price, in percentage terms, will
bring about a larger change in quantity supplied.

28
Q

inelastic supply

A

Situation where any change in price, in percentage terms will bring about a smaller change in quantity supplied.

29
Q

perfectly elastic supply

A

quantity supplied is zero below some price and infinite above that price

30
Q

perfectly inelastic supply

A

the quantity supplied does not change at all regardless of the price

31
Q

income elasticity of demand

A

% change in Q.D. / % change in income
positive = normal good
negative = inferior good

32
Q

cross price elasticity

A

% change in Q.D. of good X / % change in price of good Y
positive = substitues
negative = complements

33
Q

shortage

A

insufficiency of a good or service that occurs when the quantity
supplied occurs when the prices are bellow the equilibrium price)
Q.S. < Q.D.
below equilibrium

34
Q

surplus

A

the excess product when supply is greater than quantity demanded
Q.D. < Q.S.
above equilibrium

35
Q

producer surplus

A

price what firms are willing to sell at
the triangle BELOW Pe to the SUPPLY curve

36
Q

consumer surplus

A

price consumers are willing to actually pay
the triangle ABOVE Pe to DEMAND curve

37
Q

total economic surplus

A

the sum of consumer surplus and producer surplus.

38
Q

Market imbalances

A

quantity supplied and quantity demanded in a market are not equal

39
Q

disequilibrium

A

when the quantity demanded does not equal the quantity supplied

40
Q

subsidies

A

financial benefit from GOv. that gives consumers and/or firms money
shift RIGHT in SUPPLY curve
No DWL and no need to find CS or PS in subsidies graph

41
Q

Quota

A

a limit on the quantity of some sort of activity, such as imports.

42
Q

DWL

A

the loss of society’s consumer surplus as a result of policies that artificially change prices or quantities.
Government intervention could cause a DWL
Shift SUPPLY curve LEFT

43
Q

excise tax

A

tax on sales of a good or service (per-unit Tax)
SUPPLY curve shifts LEFT

44
Q

tariff

A

a tax imposed on imports ( world price so vertical line instead of shift )

45
Q

import quota

A

government imposed limits
on the quantity of a certain good that can be imported into a country.

46
Q

free trade

A

policies that allow permit inexpensive imports and exports, without tariffs or
other trade barriers

47
Q

movement on demand curve

A

when price rises, it cause movement along the demand curve up
when prices falls, cause a movement along the demand curve down
PRICE CHANGES QUANTITY DEMANDED NOT DEMAND

48
Q

movement on supply

A

when price rises, the quantity supplied goes up causing a movement up the supply curve
when prices fall, the quantity supplied goes down causing a movement down the supply curve

AP Micro (6 decks)

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