Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
42 Cards in this Set
- Front
- Back
|
Elasticity |
Responsiveness in one dependent variable Y to changes in anotherindependent variable X , ceteris paribus. |
|
|
Price elasticity of demand equiation |
%Change in Quantity Demanded ___________________________________ % Change in price |
|
|
The elasticity of Eggs and Butter |
Eggs are Price Inelastic (No Close Sub)
Butter is Price Elastic (Close Sub) |
|
|
Point Formula |
(% change in Qd) / (% change in P)= (ΔQd/Qd) / (ΔP/P)= (P / Qd) x (1/slope) |
|
|
Arc Formula |
(% change in Qd) / (% change in P)= (ΔQd/average Qd) / (ΔP/average P)= (average P / average Qd) x (1/slope) |
|
|
Responses to price changes >1 =1 <1 =∞ =0 |
>1 Elastic =1 Unit <1 Inelastic =∞ Perfectly Elastic =0 Perfectly Inelastic |
|
|
Price elasticity of supply equation |
% change in quantity supplied ________________________________ % change in price |
|
|
Income elasticity of demand equation |
% change in quantity demanded _________________________________ % change in income |
|
|
A Normal Good is when |
Income increases demand increases. The demand shifts Right. |
|
|
A Inferior Good is when |
Income increases Quantity Demanded decreases thus demand shifts left. |
|
|
Cross Price elasticity formula |
% change in quantity demanded of a good _________________________________________ % change in price of a related good |
|
|
What is Cross Price Elasticity of Demand |
Responsiveness of quantity demanded in one good to changes in the price of another related substitute (Positive) or complementary good (Negative), ceteris paribus |
|
|
3 Fundamentals questions of Economics |
What goods or services will be produced? How to produce these goods? Who will receive these goods? |
|
|
Opportunity Cost Give an example |
What you give up to get it or the value of the next best alternative i.e. a farmer wants to grow carrots his 'opportunity cost' is not growing potatoes |
|
|
Positive Statements Normative Statements |
P/Claims that attempt to describe the world as it is N/Claims that attempt to prescribe how the world should be. |
|
|
Absolute Advantage |
The ability to produce a good using fewer inputs than another producer |
|
|
Comparative Advantage |
The ability to produce a goof at a lower opportunity cost than another producer |
|
|
Market |
A group of buyers and sellers of a particular good or service |
|
|
Law of Demand |
Holding everything else constant, Price of product falls, quantity demanded will increase. Vice Versa |
|
|
Consumer Surplus |
The buyers willingness to pay minus what the buyer actually pays. |
|
|
5 Most importan variable that shift demand are |
Prices of related goods (substitutes and compliments) Income (normal good Vs inferior good) Tastes- Population and demographics Expected future prices |
|
|
Law of Supply |
Holding everything else constant, increase in the price of a product cause increases in the quantity supplied and vice versa |
|
|
Producer Surplus |
Amount a seller is paid minus the sellers cost |
|
|
4 Important Variable that shift supply are |
- Input prices - Technology - Expectations - Number of sellers |
|
|
Equilibrium |
A situation in which demand and supply have been brought into balance |
|
|
Surplus |
Quantity Supplied is greater than Quantity Demanded |
|
|
Shortage |
Quantity Demand is greater than Quantity Supplied |
|
|
Subsidy |
Payment from the government, to consumers or sellers, for each unit of good that is bought or sold. (negative Taxes) |
|
|
What separates ones salary from another |
The supply and demand for their labour |
|
|
What is Marginal Product |
The addition output from an imput |
|
|
MPL Formula & VMPL Formula |
MPL = ΔQ/ΔL VMPL = MPL x P VMPL = MPL x P |
|
|
What shifts Labour Demand? |
The Output price, Technological Change and Supply of other Factors (i.e. Capital) |
|
|
Tariff |
A tax on imported good
|
|
|
Why do governments intervene in markets |
Market is not economically efficient, equity, stabilising it or regulating laws |
|
|
Excludable |
A person can be prevented from using it |
|
|
Rivalry |
One persons use diminishes an others use |
|
|
The four types of goods |
Private Club Common Public |
|
|
Give an example of four types of goods |
Pure Public - National Defence Common Resource - Congested Road Club Good - Uncontested Private Beach Pure Private Good - Concert |
|
|
Externality |
A persons Activity Effects the wellbeing of a bystander. Bystander does not pay or be compensated in effect |
|
|
Example or positive and negative externality |
Positive - Beekeeper Negative - Pollution |
|
|
Coase Theorem |
Private parties can bargain costlessly over the allocation of resources. |
|
|
Government solutions to externalities |
Command & Control Policies and Market-based Instruments |
