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Unit 2
Econ
| Question | Answer |
|---|---|
| When people have the desire to own something and the ability to pay for it, they generate this in our economy. | Demand |
| It lists the quantity of a good people will buy at each different price. | demand schedule |
| This term refers to the principle that consumers buy more of a good when its price decreases and less when its price increases. | law of demand |
| It is a graphic representation of a demand schedule. | demand curve |
| When the price of a good or service changes, this change occurs. | a change in the quantity demanded |
| If the price of pizza increases, this will occur. | a decrease in the quantity demanded |
| If the price of pizza decreases, this will occur. | an increase in the quantity demanded |
| When there is a change in something other than price, such as consumers' income or tastes, this change occurs. Ultimately, we want more or less of a product at every price. | a change in demand |
| These are the factors that shift (or change) demand | the price of related goods consumers' income the number of consumers consumers' tastes and preferences consumers' expectations of the future |
| These are the two types of "related goods." | substitutes (goods used in place of one another, e.g. Pepsi and Coke) compliments (goods bought and used together, e.g. cereal and milk |
| This is how a change in the price of a substitute affects demand. | price of substitute↑ = demand for original good↑ price of substitute↓ = demand for original good↓ |
| This is how a change in the price of a complimentary good affects demand. | price of compliment↑ = demand for the other good↓ price of compliment↓ = demand for the other good↑ |
| These are examples of normal goods. | new car, brand named clothing, iPad, diamond ring |
| This is how a change in consumers' income affects the demand for normal goods. | income↑ = demand↑ income↓ = demand↓ |
| These are examples of inferior goods. | bus pass, Hamburger Helper, cheap beer |
| This is how a change in consumers' income affects the demand for inferior goods. | income↑ = demand↓ income↓ = demand↑ |
| This is how a change in the number of consumers affects demand. | # of consumers↑ = demand↑ # of consumers↓ = demand↓ |
| This is how a change in consumers' tastes and preferences affects demand. | consumers' taste↑ = demand↑ consumers' taste↓ = demand↓ |
| This is how a change in consumers' expectations of the future affects demand. | price in future↑ = demand now↑ price in future↓ = demand now↓ |
| This term refers to the sensitivity of consumers to price changes. | elasticity of demand |
| These are a few goods for which there is typically inelastic demand. | gasoline, cigarettes, insulin |
| When there is this type of demand for a good or service, consumers are sensitive to price changes. (i.e. Raise the price and few consumers will buy the product.) | elastic demand |
| These are a few goods for which there is typically elastic demand. | apples, cars, furniture |
| These are the factors that affects elasticity of demand. | availability of substitutes amount of income spent on the good necessity vs. luxury time |
| This is how elasticity of demand is affected by the availability of substitutes | many substitutes = elastic demand (e.g. There are many fruit substitutes for apples.) few substitutes = inelastic demand (e.g. There are no substitutes for insulin.) |
| This is how elasticity of demand is affected by the amount of a consumer's income that is spent on the good. | large portion of one's income = elastic demand (e.g. Your landlord doubles your rent.) small portion of one's income = inelastic demand (e.g. A pack of gun doubles in price.) |
| This is how elasticity of demand is affected by whether a good is a luxury or a necessity. | luxury = elastic (e.g. candy) necessity = inelastic (e.g. propane to heat your house) |
| This is how elasticity of demand is affected by the amount of time a consumer has. | lots of time = elastic little time = inelastic |
| These are two practical applications of elasticity of demand. | It helps businesses understand how to price their products and maximize their profits. It helps governments understand which items it can tax most effectively. |
| This term refers to the amount of goods and services available in the marketplace. | supply |
| It lists the quantity of a good offered at each different price. | supply schedule |
| This term refers to the principle that sellers offer more of a good at higher prices and less at lower prices. | law of supply |
| This is why sellers offer more of a good at high prices. | higher prices = higher profits |
| It is a graphic representation of a supply schedule. | supply curve |
| When the price of a good or service changes, this change occurs. | a change in the quantity supplied |
| If the price of pizza increases, this will occur. | an increase in the quantity supplied |
| If the price of pizza decreases, this will occur. | a decrease in the quantity supplied |
| When there is a change in something other than price, such as suppliers' costs or expectations, this change occurs. Ultimately, sellers want to supply more or less of a product at every price. | a change in supply |
| These are the factors that shift (or change) supply. | the price of related goods input costs the number of suppliers technology taxes and regulations suppliers' expectations of the future |
| This is how a change in the price of a substitute affects supply. | price of substitute ↑ = supply for original good ↓ price of substitute ↓ = supply for original good ↑ (e.g. If the price of corn increases, many wheat farmers will grow corn, and the supply of wheat will fall.) |
| This is how a change in the price of a complimentary good affects supply. | price of compliment ↑ = supply for original good ↑ price of compliment ↓ = supply for original good ↓ (e.g. If the price of beef increases, more cattle will be raised and the supply of leather will increase.) |
| This is how a change in the cost of inputs affects supply | number of suppliers ↑ = supply ↑ number of suppliers ↓ = supply ↓ (e.g. If two more shoe stores open in town, the supply of shoes in Sandpoint will increase.) |
| This is how technology affects supply. | technology ↑ = supply ↑ technology ↓ = supply ↓ (e.g. If Ford Motor Company replaces human workers with robotic machines that can work faster and longer, the supply of cars will increase.) |
| This is how taxes and regulations affect supply. | taxes/regulations ↑ = supply ↓ taxes/regulations ↓ = supply ↑ (e.g. If the federal government raises corporate income taxes, firms will not have as much money to spend on the factors of production, and thus the supply of goods will fall.) |
| This is how a change in suppliers' expectations of the future affects supply. | price in future ↑ = supply now ↓ price in future ↓ = supply now ↑ |
| This is the point where the quantity demanded equals the quantity supplied. In an uncontrolled market, price and quantity gradually move toward this point. | equilibrium |
| When there is more demand than supply in a market, this type of disequilibrium occurs. | shortage |
| When there is more supply than demand in a market, this type of disequilibrium occurs. | surplus |
| This is why markets tend toward equilibrium | Disequilibrium (shortage/surplus) is not as profitable for sellers as equilibrium. Sellers "search" for the most profitable price. |
| This is what determines prices in an uncontrolled marketplace. | supply and demand (i.e. the interaction of sellers and buyers) |
| When the government sets a maximum legal price on a good or service, it creates this. | price ceiling |
| To prevent the negative economic effects of landlords imposing high and frequent rent increases, the city governments of San Francisco, New York City, and Washington D. C. have created this type of price ceiling. | rent control |
| When the government sets a minimum legal price on a good or service, it creates this. | price floor |
| In an attempt to aid lower income workers, federal and state governments have created this type of price floor. | minimum wage |
| This is the role prices play in our economy. In other words, this is how prices help us. | Prices serve as a common language for buyers and sellers. Prices serve as signals for buyers and sellers to act. Prices help to distribute resources efficiently. |
| A branch or group of businesses that produce the same or closely related goods and services is called this. | industry |
| These are a few major industries in the US economy. | banking industry auto industry movie industry |
| This term refers to the degree of competition among firms operating in the same industry or market. | market structure |
| These are the four market structures. | perfect competition monopolistic oligopoly oligopoly monopoly |
| These are the characteristics of a market categorized as having perfect competition. | many sellers no variety of goods no control over prices easy for new sellers to enter the market |
| These are a few examples of goods that are sold in markets which are categorized as being closest to perfect competition. | vegetables milk gasoline shares of stock |
| These are the characteristics of a market categorized as a monopolistic oligopoly. | many sellers some variety of goods little control over prices easy for new sellers to enter the market |
| These are a few examples of goods that are sold in markets which are categorized as monopolistic oligopolies. | clothing restaurants books |
| This is why the monopolistic competition market structure is called monopolistic. | In a monopolistic oligopoly, the firm's products are similar but not identical. There are many firms competing, but each firm holds a monopoly over its own product. |
| These are the characteristics of a market categorized as an oligopoly. | a few dominant sellers some variety of goods some control over prices difficult for new sellers to enter the market |
| In general, a market or industry is categorized as an oligopoly if this condition is met. | The four largest firms produce at least 75% of the output. |
| These are a few examples of goods that are sold in markets which are categorized as oligopolies. | cars airline tickets soda computers |
| These are the concerns that most governments have with oligopolies. | price leadership collusion cartels |
| Sometimes, instead of competing with one another, firms in an oligopoly follow along with the prices and output of the market leader. This practice is called this. | price leadership |
| This is an agreement among firms to divide the market, set prices, or limit production. Because this agreement enables firms to act together and monopolize a market, it is illegal in the United States. | collusion |
| This is a formal organization of producers to coordinate prices and production. Because this type of organization enables firms to act together and monopolize a market, it is illegal in the United States. | cartel |
| These are the characteristics of a market categorized as a monopoly. | one seller no variety of goods complete control over prices almost impossible for new sellers to enter the market |
| Although monopolies are generally illegal in the United States, these are the three types of legal monopolies that do exist. | natural monopolies geographic monopolies government monopolies |
| In this type of legal monopoly, the market runs most efficiently when one large firm supplies all of the output. (e.g. public water company) | natural monopoly |
| In this type of legal monopoly, there is simply an absence of sellers because it may not be financially feasible for another company to come in the market. (e.g. a general store in a very small town) | geographic monopoly |
| In this type of legal monopoly, a firm has been granted monopoly power through a patent, copyright, or government franchise contract. | government monopolies |
| This is a license that gives the inventor of a new product the exclusive right to copy and sell it for a certain period of time. | patent |
| This is a license that gives the creator of a new literary or artistic work the exclusive right to copy and sell it for a certain period of time. | copyright |
| This is a contract issued by a government to sell a good or service within an exclusive market. (e.g. A single firm is authorized to sell food and drinks at Yellowstone National Park.) | government franchise |
| To better compete with other companies and maximize profits, many firms devise pricing schemes that divide their customers into groups based on how much they will pay. This practice is called this. | price discrimination |
| Not only do businesses compete with one another by adjusting their prices, firms also engage in nonprice competition, which involves attracting customers through these ways. | physical characteristics of their goods (size, color, shape, texture, taste) location of stores service level offered (drive-through vs. sit-down food service) advertising, image, status |
Created by:
Michaella Gemmrig
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