Unit 2 Test Flashcards
As the price of a good increases, the demand…
decreases
4 reasons why prices effectively perform the allocation function
- don’t need interference
- neutral
- easily understood
- flexible
What can change the market supply curve? (4)
- costs of inputs
- productivity of workers
- subsidies
- gov’t regulations
When does a surplus occur?
Decrease in demand, and price is too high
What term is referred to when a given change in prices causes a proportional change in quantity demanded?
unit elastic
What is referred to when combining fixed costs with variable costs?
total cost
What term is referred to when a given change in price causes a relatively smaller change in the quantity demanded?
inelastic
During which stage of production has the firm hired too many workers and they are getting in each other’s way?
3rd stage
What happens to gold when the political or economic climate is unstable?
Demand for gold increases, and price of gold increases
What are 4 examples of fixed costs?
- rent
- property
- executive salaries
- interest charges on bonds
What does a shift to the left of the supply curve show?
decrease in quantity supplied
3 characteristics of rationing
- high administrative cost
- diminishing incentive
- fosters carelessness
Which theory deals with the relationship between the factors of production and the output of goods and services?
Theory of Production
An increase in the price of one goods usually leads to the decrease in the demand for its related good, known as its…
complement
Why would a shortage occur?
Increase in demand, and price is too low
