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Econ section 2
| Question | Answer |
|---|---|
| What is comprised of all the buyers and sellers for a particular good or service? Examples? | Market -New york stock exchange -Chicago mercantile exchange |
| What kind of market has.. - Product sold is standardized - Number of buyers and sellers is large - All participants well informed on market price - No one buyer or seller influences market price | Perfectly Competitive market |
| Market for gasoline is example for what type of market? | Nearly competitive market |
| • Higher prices = lower quantity demanded • Lower prices = higher quantity demanded This negative relationship is called what? | Law of demand (result of cost benefit analysis) |
| A table in economics that shows the quantity of a good or service that consumers are willing and able to buy at various price levels | demand schedule |
| How to find market demand schedule? | Add up quantity that every consumer will purchase at EACH possible price. |
| Quantity demanded on curve? | A point on the curve |
| Demand on a curve? | The entire curve |
| When less of a product is demanded at each price, what happens to the curve on a demand curve? | It will shift LEFT. (quantity demanded will decrease at every price.) |
| Any product or service whose demand increases when consumer income increases and demand decreases when consumer income decreases. (demand positively related to income) | Normal good |
| Goods for which demand falls when income rises are called? (Example: Bus rides- more income, less likely to ride bus) | Inferior goods |
| Goods where decline of price in one will cause reduction in demand for the other. (ex. low plane costs = low car driving) | Substitute goods |
| Goods where lower price in one good causes increased demand for another good. (ex. low car insurance cost = more car ownership) | Complements |
| How is market demand derived? | Adding up the demands of individual consumers at a SPECIFIC price point. |
| Positive relation between price and quantity supplied is called? (reflects cost benefit analysis of rational suppliers) | Law of supply (basically- it cost more, me make more money, i make more) |
| Which curve is obtained by adding the quantities supplied at each price by all of the suppliers in the market. | Market supply curve |
| Anything the supplier has to purchase to supply a product is called? (ex. gas stations have to pay their suppliers for gas) | Inputs |
| A point at which all the forces at work in a system are balanced by other forces, resulting in a stable and unchanging situation. | Equilibrium |
| When does market equilibrium occur? | combination of price and quantity where supply and demand curves intersect. |
| Adding the benefit value/consumer surplus of each person together gives you what? | Combined consumer surplus |
| Combining consumer surplus and producer surplus provides a measure of total benefits that market participants receive from their transactions | total surplus |
| What is BGH? | Bovine Growth Hormone - Increases dairy production 10-20% |
| The introduction of a new technology has other, more subtle effects, called what? | Externalities |
| What measures how much the quantity DEMANDED responds to a change in price. | The price elasticity of demand |
| If the price of the good is higher, buyers will demand less of the good; if the price is lower, then they will demand more. | Law of demand (negative relationship) |
| What provides a measure of the responsiveness of demand to price changes and is independent of the units of measurement? | elasticity |
| ELASTICITY IS LESS THAN 1, what kind of demand curve is it? | Inelastic demand |
| ELASTICITY IS GREATER THAN 1, what kind of demand curve is it? | ELASTIC DEMAND |
| ELASTICITY IS EQUAL TO 1, what kind of demand curve is it? | Unit elastic demand |
| EQUAL TO INFINITY, what kind of demand curve is it? | Perfectly elastic |
| reflects the ease with which suppliers can alter the quantity of production. | Price elasticity of supply |
| Supply of Van Gogh's sunflower paintings is what? There is no way to get more *hint hint* | Supply is perfectly inelastic |
| Supply curve: Elasticity equals to 0 | perfectly inelastic |
| What year did an interruption in Middle Eastern oil supplies occur and a raise in heating oil prices shot up? What did the federal government due to combat that? | 1979, implemented ceiling on prices to protect low income families. |
| What is the term for the reduction in social welfare that occurs when a tax prevents mutually beneficial transactions from taking place? How is it represented on a supply and demand graph? | Deadweight Loss • The Cause: The tax creates a price wedge between buyers and sellers, which shrinks the market size and stops trades that would have otherwise generated surplus. - On a graph, it is represented by a small triangle to the right |
| an economic model that shows the maximum possible output combinations of two goods or services an economy, firm, or individual can produce when all available resources and technology are used efficiently | Production Possibilities Frontier (PPF) |
| whats it called when one must be able to produce more of a good than others given the same amount of resources? | Absolute advantage |
| the economic actors who are responsible for supplying goods and services in the economy. | “firm” |
| increase in costs that occurs when producing an additional unit of output is referred to as? | Marginal cost |
| happens in the long run when a business increases all of its production inputs (such as labor, capital, and raw materials) by a certain percentage, but the resulting increase in total output is less-than-proportional | diminishing of returns to scale |
| the additional money a business earns from selling one more unit of a good or service | Marginal revenue |
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