Economics Final Exam Unit 2

Front 1

demand

Back 1

a relation showing the quantities of a good that consumers are willing and able to buy at various prices per period, other things constant

Front 2

law of demand

Back 2

the quantity of a good demanded per period relates inversely to its price, other things constant

Front 3

three reasons why law of demand is true

Back 3

income effect: people by cheaper goods to increase their real income

substitution effect: the change in the relative price- the price of one good relative to the prices of other goods- causes the substitution effect

law of diminishing marginal utility: the more of a good a person consumes per period, the smaller the increase in total utility from consuming one more unit, other things constant

Front 4

demand curve

Back 4

a curve or line showing the quantities of a particular good demanded at various prices during a given time period, other things constant

Front 5

quantity demanded

Back 5

the amount demanded at a particular price

Front 6

elasticity of demand

Back 6

measures how responsive quantity demanded is to a price change; the percentage change in quantity demanded divided by the percentage change in price

Front 7

3 kinds of elasticity

Back 7

inelastic: the percent change in quantity demanded is less than the percent change in price, elasticity between 0 and 1

unit elastic: if demand is equal to one

elastic: if demand is greater than 1

Front 8

elasticity and total revenue

Back 8

- if demand is elastic, lower price
- if demand is inelastic raise price

Front 9

3 determinants of demand elasticity

Back 9

time, availability of substitutes, share of consumer budget spent on good

Front 10

movement along a demand curve

Back 10

quantity demanded changes

Front 11

shift of demand

Back 11

demand changes

Front 12

5 determinants of demand

Back 12

income, price of related goods, number of composition of consumers, consumer expectations, consumer tastes

Front 13

supply

Back 13

a relation showing the quantities of a good producers are willing and able to sell at various prices during a given period, other things constant

Front 14

law of supply

Back 14

the quantity of a good supplied during a given time period is usually directly related to its price, other things constant

Front 15

two reasons why law of supply is true

Back 15

willingness
ability

Front 16

supply vs. quantity supplied

Back 16

supply- entire relation between the price and quantity supplied

quantity supplied- refers to a particular amount offered for sale at a particular price (a point on a supply curve)

Front 17

elasticity of supply

Back 17

a measure of the responsiveness of quantity supplied to a price change; the percentage change in quantity supplied divided by the percentage change in price

Front 18

3 kinds of elasticity

Back 18

elastic- exceeds 1
unit elastic- =1
inelastic- between 0 and 1

Front 19

determinant of supply elasticity

Back 19

time

Front 20

movement along a supply curve

Back 20

quantity supplied changes

Front 21

shift of supply

Back 21

supply changes

Front 22

5 determinants of supply

Back 22

cost of resources, price of goods the resources could make, technology, producer expectations, number of sellers

Front 23

three stages of production

Back 23

-increasing marginal returns
-diminishing but positive marginal returns
-negative marginal returns

Front 24

market equilibrium

Back 24

where supply and demand intersect; shows market quantity and price

Front 25

disequilibrium

Back 25

-surplus is when supply exceeds demand (caused by price floor)
-shortage is when demand exceeds supply (caused by price ceiling)

Front 26

shifts of demand curve

Back 26

given an upward sloping supply curve, a rightward shift of the demand curve increases both price and quantity, and a leftward shift of the demand curve decreases both price and quantity

Front 27

shifts of supply curve

Back 27

given a downward sloping demand curve, a rightward shift of the supply curve decreases price, but increases quantity, and a leftward shift of the supply curve increases price, but decreases quantity

Front 28

demand and supply increase

Back 28

EQ Price change is indeterminate
EQ Quantity increases

Front 29

demand decreases, supply increases

Back 29

EQ Price falls
EQ Quantity change is indeterminate

Front 30

demand increases, supply decreases

Back 30

EQ Price rises
EQ Quantity change is indeterminate

Front 31

demand and supply decrease

Back 31

EQ price change is indeterminate
EQ quantity decreases

Front 32

four market structures from most firms to least firms

Back 32

perfect competition, monopolistic competition, oligopoly, monopoly