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Economics
Final Exam part 2
| Question | Answer |
|---|---|
| demand | willing and able to buy a good |
| quantity demand | how much of a good someone is willing and able to buy |
| law of demand | as price increases, quantity demanded decreases. As price decreases, quantity demanded increases |
| substitution effect | when prices of good increase beyond what consumer values it at, consumer substitutes another good |
| income effect | when prices increase, and income stays the same, purchasing power reduced, and consumer changes behavior accordingly |
| ceteris paribus | all other things equal. Assumption made in economic graphs to hold things constant except for price. Dropped when shifts are done |
| change in quantity demanded | change in price, movement along curve |
| shifts of demand: MERIT | change in anything else, shift of entire curve 1. Market size 2. Expectations 3. Related (complements and substitutions) 4. Income (normal and inferior goods) 5. Taste |
| elasticity of demand | how consumers react to change in price |
| inferior good | good that you would not purchase if income increased; good that you would purchase because it was cheap. |
| normal good | good that experiences an increase in demand as the real income of an individual or economy increases |
| inelastic demand | small reaction to change in price. Necessities, medicine, gasoline. if product is inelastic, producer can raise price to increase total revenue |
| total revenue | price x quantity. Income from selling products |
| elastic demand | large reaction to change in price. Luxuries, hobbies, substitutes. Ex. cookies and gold watches |
| supply | willing and able to produce/sell a product |
| quantity supplied | how much wiling and able to produce/sell a product |
| law of supply | as price increases, quantity supplied increases. As price decreases, quantity supplied decreases. |
| change in quantity supplied | change in price, movement along curve |
| shifts of supply: TINGLE | 1. Technology 2. Input Costs 3. Number of producers 4. Government (excise tax, subsidy, regulation) 5. Labor productivity 6. Expectations |
| marginal product | change in total output when one or more worker is added |
| fixed cost | cost that does not change with production. |
| variable cost | cost that changes with production |
| total cost | fixed cost + variable cost |
| marginal cost | additional cost of producing one more unit |
| marginal revenue | additional income when one more unit is sold |
| maximize profit | MR = MC |
| elasticity of supply | how producers react to change in price |
| elastic supply | very responsive to change in price. can change production cycle inputs, . long run |
Created by:
danat214
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