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ECON 102 BIG QUESTIANO BANK OF KNOWLEDGE > WEEK 3 > Flashcards

WEEK 3 Flashcards

1
Q

What is the cross-price elasticity of demand

A

The %change in quantity demanded of a good in response to a 1% in price of another good

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2
Q

Example of cross-price elasticity

A

If coffees demand increases by 1%, tea demands are increased by 2%

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3
Q

In cross-price elasticity when is the effect positive and negative

A

Positive if a substitute
Negative if complements

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4
Q

What is income elasticity of demand

A

%change in demand associated with a 1% change in consumer income

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5
Q

what does income elasticity of demand show

A

shows how responsive demand is to income changes

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6
Q

IS income elasticity positive or negative for normal and inferior goods

A

Positive for normal goods
Negative for inferiror goods

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7
Q

What does the price elasticity of supply measure

A

Sellers sensitivity to changes in price

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8
Q

What is the equation for elasticity of supply

A

%change in quantity supplied / %change in price

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9
Q

Determinents of supply elasticity

A

Flexibility of inputs
Mobility of inputs
Ability to produce substitute inputs
Time

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10
Q

What is consumer surplus

A

The difference with a buyers reservation price and how much they pay

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11
Q

How to work out consumer surplus

A

Find the area below the demand line above the equilibrium price

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12
Q

What is producer surplus

A

The difference with sellers reservation price and price received

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13
Q

How to work out producer surplus

A

The area above the supply line until the equilibrium price

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14
Q

How to find the total economic surplus

A

Consumer surplus + Producer surplus

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15
Q

What is Pareto efficiency

A

No one can be made better off without making someone worse off

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16
Q

When is the market Pareto efficient

A

When market equilibrium is found

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17
Q

What is competitive equilibrium

A

When profit and utility maximizing consumers/producers meet at an efficient price

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18
Q

What assumptions are made for a market to be Pareto efficient

A

All benefits from consumption are captured by demand curve
All costs from production are shown in supply curve
Low transaction cost
Perfectly competitive market

19
Q

How to find DWL

A

After finding the producer and consumer surplus the remaining area in the triangle up until the equilibrium is the DWL

20
Q

What is DWL

A

Dead weight loss is the reduction in total economic surplus

21
Q

What is the other goal than efficiency for markets

A

Equity

22
Q

What are consumer and producer curves

A

Consumer - demand
producer - supply

23
Q

What are the 3 steps to pick the best consumer bundle

A

Preferences
Budget constraints
Put them together

24
Q

What is a consumption basket

A

A complete list of quantities for all available goods

25
Q

What is the notation for consumption baskets

A

(Xa,Xb,Xc)

26
Q

If something is strictly preferred then what sign

A

greater than

27
Q

If something is weakly preferred what is the sign

A

greater than or equal to

28
Q

If something is indifferent what is the sign

A

Swiggly line, can pick either one

29
Q

What assumptions are made in consumption baskets

A

Completeness
Transitivity
Non-satiation

30
Q

What is completeness

A

For any bundle they can choose what item they prefer

31
Q

What is transitivity

A

If A>B and B>C then assume A>C

32
Q

What is non - satiation

A

More is better than less

33
Q

What notations the utility function

A

U(X)

34
Q

What is utility function

A

Assign to each bundle a number of happiness

35
Q

If U(X) > U(Y)

A

Strictly prefers X

36
Q

If U(X) = U(Y)

A

Indifferent

37
Q

What does ordinal utility mean

A

Ranking matters between bundles, not the difference

38
Q

When are indifference curves used

A

When 2 bundles are indifferent

39
Q

Give 2 co ords on an indifference curve

A

(3,4) and (4,3) - 3x4=4x3

40
Q

Where are higher utility curves

A

Further away from the origin

41
Q

Always what sloping

A

Downwards sloping

42
Q

Can they cross

A

NO

43
Q

If 2 bundles are on the same curve they are

A

indifferent

44
Q
A

ECON 102 BIG QUESTIANO BANK OF KNOWLEDGE (9 decks)

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