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ECON 101 > Unit 2 > Flashcards

Unit 2 Flashcards

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1
Q

What is demand?

A

How much people want to buy something

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2
Q

What are the POINTS of demand?

A
  1. Price
  2. Income
  3. Information
  4. Price of other goods
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3
Q

What is price (points of demand)?

A

When something costs more, people tend to buy less of it. This is called the law of demand

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4
Q

What is income (points of demand)?

A

How much money you have affects what you can buy

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5
Q

What is information (points of demand)? What is an example of this?

A

What we know can change what we buy.

EXAMPLE: Shortage of toilet paper during COVID. Sudden increase in demand for it led to shortages and price changes.

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6
Q

What is price of other goods (points of demand)? What are examples of both?

A

Complement - Things people typically buy together. If the price goes up of one good, we might buy less of both.

EXAMPLE: If movie tickets prices go up, people might buy less popcorn.

Substitute - Goods that are often purchased instead of
another, typically in response to price changes.

EXAMPLE: If hot dog bun prices go up, people might buy burgers instead.

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7
Q

What are the two main ways to represent demand?

A

Graphical representation and algebraic representation

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8
Q

Where does price and quantity go on the axis of a demand curve?

A

Price is always on the y-axis and quantity is always on the x-axis

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9
Q

Demand always shifts to the…

A

Right

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10
Q

When the price goes ↑

A

People buy less

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11
Q

When the price goes ↓

A

People buy more

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12
Q

What happens when quantity supplied = quantity demanded?

A

We get equilibrium price of a product

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13
Q

What are the four market behaviours?

A
  1. Supply can INCREASE
  2. Supply can DECREASE
  3. Demand can INCREASE
  4. Demand can DECREASE
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14
Q

What is this equation [ Qd(P) = 500 - P ] an example of?

A

Algebraic representation of DEMAND

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15
Q

What is elasticity?

A

Measures how much quantity demanded changes in response to a change in price

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16
Q

What are examples of highly elastic goods, that are very sensitive to price changes?

A

Luxury items like designer clothing or non-essential items like vacation trips

17
Q

What are examples of inelastic goods, that are less sensitive to price changes?

A

Essential items like food, gasoline or goods and services like electricity or medical services

18
Q

What is a graphical approach?

A

Graphical approach in economics means using charts and graphs to show economic ideas visually, making them easier to understand

19
Q

If the demand curve is very steep…

A

It means there is a small change in price that leads to a big change in how much people want to buy

20
Q

What is supply?

A

How much of a product or service is available in the market for consumers to purchase

21
Q

What are the three main inputs that affect quantity supplied?

A
  1. Price
  2. Cost
  3. Government Interventions
22
Q

What is price (three main inputs that affect quantity supplied)?

A

When the price of a product goes up, more suppliers are willing to produce and sell it because they can make more money

23
Q

What is cost (three main inputs that affect quantity supplied)?

A

All about how much is costs to make something

24
Q

What is government interventions (three main inputs that affect quantity supplied)?

A

Government can affect how much of something is available by setting rules

25
Q

Supply always shifts to the…

A

Left

26
Q

Increasing prices increase supply while it decreases demand…

A

True

27
Q

For law of supply, what coefficient should go in front of our variable price?

A

A positive coefficient

28
Q

What is this equation [ Qs(P) = 120 + 6p ] an example of?

A

Quantity of supply equation

29
Q

What is supply and demand equilibirum?

A

When what producers want to sell equals what consumers want to buy, creating a balance.

30
Q

What is the graphical representation of equilibrium?

A

Where supply and demand’s curves intersect

31
Q

What is this equation [ Qs = Qp ] an example of?

A

Equational representation of equilibrium

32
Q

When should you use the supply and demand model?

A
  1. Price Taking - Market agents must accept market prices
  2. Identical Products - Goods in the market are considered the same
  3. Full Information - Everyone knows price and quality
  4. Low Trading Costs - Easy and efficient market transactions
33
Q

What is a surplus?

A

The extra value an individual gets from something compared to what they paid for it

34
Q

What is producer surplus?

A

When a producer sells something for more than they are willing to

35
Q

What is a consumer surplus?

A

When a consumer buys something for less than they value it

36
Q

Why does surplus matter?

A

Surplus helps measure welfare and compare policies. The more surplus, the better policy there is

37
Q

What is deadweight loss?

A

Surplus that is lost due to taxes

38
Q

What are the four possibilities of demand and supply graphs?

A
  1. Demand can go UP
  2. Demand can go DOWN
  3. Supply can go UP
  4. Supply can go DOWN

ECON 101 (4 decks)

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