Microeconomics Test 2

Front 1

Price System

Back 1

Those willing and able to pay the price get what is produced

Price is directly related to scarcity

Front 2

Queues

Back 2

When price does not reflect scarcity and is relative to the desire to own something

Front 3

3 other methods societies use to decide who get what

Back 3

Lotteries, Government rationing, Force

Front 4

Benefit of the Price system

Back 4

Efficiency in the sense that surpluses and shortaged as we defined them are avoided

Front 5

Problem with the Price system

Back 5

Allocation or distribution of good that society does not like may occur. We may get undesirable distribution of "goods" and "bads"

Front 6

An example of a bad is

Back 6

Pollution

Front 7

We can use government sectors, non-profit sectors, and a legal system to

Back 7

allocate goods and services in a preferred way

Front 8

Price ceilings are irrelevant if

Back 8

ceiling price is greater than equilibrium price

Front 9

Price floor must be

Back 9

above the equilibrium price to be effective

Front 10

Quota

Back 10

A maximum quantity allowed for sale

Front 11

With quotas the supply curve becomes

Back 11

Kinked

Front 12

Utility

Back 12

The enjoyment or satisfaction that a good or service gives (benefit or well-being)

Front 13

Util

Back 13

A unit used to measure utility- arbitrary

Front 14

Jeremy Bentham

Back 14

developed a philosphy known as utilitarianism which said that society should act to provide the greatest good for the greatest number. They hoped to invent a utilometer to measure utility

Front 15

Marginal utility (MV)

Back 15

Change in total utility due to a one unit change in quantity of a good or a service consumed

Front 16

Law of Diminishing MU

Back 16

The principle that MU decrease as quantity consumed increases

Front 17

Approximation of market CS

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CS= .5(Pmax-P*)(Q*)

Front 18

The Dez

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Your favorite little brown dog

Front 19

Producers clearly _______ because of price ceilings

Back 19

lose

Front 20

Some Consumers _________ because of price ceilings

Back 20

gain

Front 21

If we have perfectly inelastic demand

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there is no change in sum of CS+ PS

Front 22

Consumers Maximize utility when

Back 22

(MUA/PA) = (MUB/PB)
Approximatly equal

Front 23

Elasticity

Back 23

is a measure of reponsiveness. It measures how sensitive an economic variable is to a change in anouther economic variable

Front 24

Price elasticity of Demand

Back 24

Shows how sensitive quanity is to a change in price

Shows the approximate percentage change in quantity demanded per one per cent change in price

Front 25

If the absolute value of the price elasticity of demand is greater than one

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then we say the demand for this good is elastic

Front 26

If the absolute value of the price elasticity of demand is equal to one

Back 26

then we day that the demand for the good is unit elastic

Front 27

Consumers Maximize utility when

Back 27

(MUA/PA) = (MUB/PB)
Approximatly equal

Front 28

Elasticity

Back 28

is a measure of reponsiveness. It measures how sensitive an economic variable is to a change in anouther economic variable

Front 29

Price elasticity of Demand

Back 29

Shows how sensitive quanity is to a change in price

Shows the approximate percentage change in quantity demanded per one per cent change in price

Front 30

If the absolute value of the price elasticity of demand is greater than one

Back 30

then we say the demand for this good is elastic

Front 31

If the absolute value of the price elasticity of demand is equal to one

Back 31

then we day that the demand for the good is unit elastic

Front 32

If the absolute value of the price elasticity of demand is less than one

Back 32

then we day the demand for the good is inelastic

Front 33

If the absolute value of the price elasticity of demand is equal to zero

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then we say that the demand for the good is perfectly inelastic

Front 34

If the absolute value of the price elasticity of demand is equal to infinity

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then we say that the demand for the good is perfectly elastic

Front 35

Per cent of budeget

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Less expensive items tend to have more inelastic demand

Front 36

Number of sustitutes

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items with more substitutes ten to be more elastic

Front 37

The more time consumers have to adjust

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The more elasticity

Front 38

If income elasiticity of demand is greater than zero, the good is

Back 38

a normal good

Front 39

If income elasticity of demand is less than zero the good is

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an inferior good

Front 40

If the cross price elasticity of demand is greater than zero the two goods are

Back 40

substitutes

Front 41

If the cross price elasticity ofd emand is less than zero

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the two goods are complements

Front 42

If the price elastisity of supply is greater than one the good

Back 42

has price elastic supply

Front 43

if the price elasticity of supply is infinity, the good has

Back 43

perfectly elastic supply

Front 44

if the price elasticity of supply of zero the good has

Back 44

perfectly inelastic supply

Front 45

The results of studies help us understand why Congress has supported increases in the minimum wage

Back 45

1. Large help for workers whose pay goes up; relatively few lose-jobs
2. Keep up with inflation so that minnimum wage workers don't get a reduction in purchaseing power of their pay.

Front 46

BE

Back 46

FAITHFUL

Front 47

YOU ARE

Back 47

BEAUTIFUL