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42 Cards in this Set
- Front
- Back
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The gains from trade are based on what?
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Comparative Advantage, not absolute advantage
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What is a market?
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A group of buyers and sellers of a particular good or service.
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The terms of supply and demand refer to the behavior of people with what?
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the way they interact with one another in markets as buyers and sellers.
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Who determines demand?
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buyers
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Who determines supply?
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Sellers
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What is a oompetitive market?
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A market in which there are many buyers and sellers so that each only has a negligible impact on market price.
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What would Perfect Competition be like?
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-Same products
-Numerous buyers and sellers -Little price influence -Everyone is a price taker |
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What would Monopolistic Competition be like?
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Multiple Sellers
Slightly different products Price control |
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What would an Oligopoly be like?
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-Few sellers
-Non aggressive competition -Price leadership/following |
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What does the Law of Demand say?
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Other things equal, quantity demanded of a good falls when prices rise.
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Price and Quantity, in general, have a ____ relationship.
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Inverse
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What is a Demand Schedule?
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A table showing relationship between price of a good and demanded quantity. (inverse)
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What is market demand?
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the sum of all individual demands for a particular good/service.
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Individual demand curves are summed (in a demand schedule) in what way?
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Horizontally
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What would a tax that raises the price of ice-cream cones result in?
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A reduction in demand for ice-cream cones.
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What can shift the demand curve?
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-Income changes
-Prices of Related Goods -Tastes -Expectations -Buyer numbers |
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What is a normal good?
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A good for which an increase in income means an increase in demand
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What is an inferior good?
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a good for which an increase in income leads to a decrease in demand.
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What is a substitute good?
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A good that's price falls when the demand for another good falls too
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What are compliment goods?
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when a fall in the price of one good increases demand for another good.
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Example of a substitute?
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hot dogs and hamburgers
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What is the amount of good that sellers are willing and able to sell at a given price?
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Quantity supplied
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What is the Law of Supply?
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the quantity supplied of a good rises when the prices of a good rises.
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What is the relationship between price and quantity for Supply?
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direct relationship
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What is the table that shows the relationship between price of a good and quantity supplied?
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Supply Schedule
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What is Market Supply?
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the sum of all individual supplies for all sellers of a particular good.
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How can Supply be shifted?
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Change in:
-Input prices -Technology -Expectations -Number of Sellers |
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The supply of a good is ____ related to the price of the inputs used to make the good.
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negatively
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What refers to the situation in which the price has reached the level where quantity supplied equals quantity demanded?
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equilibrium
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Where is the Equilibrium Price on a graph?
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Where the supply curve and demand curve meet.
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What is Equilibrium Price?
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THe price that balances quantity supplied and quantity demanded.
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What is Equilibrium Quantity?
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The quantity supplied and the quantity demanded at the equilibrium price.
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What happens when price is greater than equilibrium price?
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quantity supplied is higher than demanded....a surplus!
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How do suppliers deal with a surplus?
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By lowering prices.
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When price is lower than equilibrium price, what happens?
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quantity demanded is higher than quantity supplied...a shortage?
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What is the Law of Supply and Demand?
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market adjusts the price of goods to a balance
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What are the Steps to analayze a change in equilibrium, in general?
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1. Determine whether the event shifts supply or demand curve (or both)
2. Determine which way it/they shift. 3. Use supply and demand diagram to see how this affects price and quantity |
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What is the primary role of government?
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Insure equitable access to markets.
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What microeconomics?
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The study of how individual households/firms make decisions and interact.
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What are macroeconomics?
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The study of the economy as a whole.
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What is the objective of macroeconomics?
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to understand economic changes affecting all firms/households/markets at once.
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What is GDP?
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the total market value of all final goods and services produce within a country in a given time.
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