Microeconomics; Q1 Exam Two - Assignment Essays %

question

Trade-off

answer

when you give up something in order to have something else

question

Opportunity Cost

answer

The value of the next best alternative that must be forgone that you must give up in order to get that item

question

Explicit Costs

answer

The traditional 'out of pocket' costs associated with making a decision (ex. cost of buying a movie ticket)

question

Implicit Costs

answer

Opportunity costs of making a decision (ex. The forgone time or wage you could have earned when you go to the movies)

question

Utility

answer

The satisfaction or happiness a consumer receives from consuming a good or service

question

Utils

answer

Units in which utility is expressed

question

Marginal Analysis

answer

Marginal means additional//Making decisions based on increments

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Consumption

answer

Consumers will consume until marginal cost=marginal benefit

question

Calculate Utility Per Dollar

answer

Divide marginal utility by price

question

Demand

answer

The different quantities of a good that consumers are willing and able to buy at different prices

question

Law of Demand

answer

There is an inverse relationship between price and quantity demanded//As price goes up, quantity demand goes down

question

Substitute Effect

answer

If the price goes up for a product, a consumer will buy less of that product and more of another substitute

question

Income Effect

answer

If the price goes down for a product, the purchasing power increases for consumers, allowing them to purchase more

question

Law of Diminishing Marginal Utility

answer

As you consume anything, the additional satisfaction that you will receive will eventually start to decrease

question

5 Shifters of the Demand Curve

answer

1. Tastes and Preferences
2. Change in Related Goods (Compliment/Substitute)
3. Change in Income
4. Number of Buyers
5. Change in Expectations

question

Substitues

answer

Goods used in place of one another

question

Complements

answer

Two goods that are bought and used together

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Inferior Goods

answer

Demand rises as income falls//Demand falls as income rises//Ex. Ramen, McDonalds purchases, used cars

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Normal Goods

answer

Goods that consumers demand more of when their incomes rise and less of when their income falls

question

Supply

answer

The different quantities of a good that sellers are willing and able to sell (produce) at different prices

question

Law of Supply

answer

There is a positive relationship between price and quantity supplied

question

6 Shifters of the Supply Curve

answer

1. Input (Resource) Price and Availability
2. Related Goods and Services
3. Expectations of Future Profit
4. Number of Sellers
5. Change in Technology
6. Government Action (Taxes&Subsidies)

question

Taxes

answer

Supply goes down

question

Subsidies

answer

A government payment that supports a business or market//Supply goes up

question

Concepts to Know

answer

How to calculate the difference between marginal utility/benefit and total utility/benefit

question

Price

answer

Price does not shift the demand curve//Price change just means you move along the line

question

Maximize Utility

answer

The consumer's money should be spent so that the marginal utility per dollar of each good equals each other

1 of 27

question

Trade-off

answer

when you give up something in order to have something else

question

Opportunity Cost

answer

The value of the next best alternative that must be forgone that you must give up in order to get that item

question

Explicit Costs

answer

The traditional 'out of pocket' costs associated with making a decision (ex. cost of buying a movie ticket)

question

Implicit Costs

answer

Opportunity costs of making a decision (ex. The forgone time or wage you could have earned when you go to the movies)

question

Utility

answer

The satisfaction or happiness a consumer receives from consuming a good or service

question

Utils

answer

Units in which utility is expressed

question

Marginal Analysis

answer

Marginal means additional//Making decisions based on increments

question

Consumption

answer

Consumers will consume until marginal cost=marginal benefit

question

Calculate Utility Per Dollar

answer

Divide marginal utility by price

question

Demand

answer

The different quantities of a good that consumers are willing and able to buy at different prices

question

Law of Demand

answer

There is an inverse relationship between price and quantity demanded//As price goes up, quantity demand goes down

question

Substitute Effect

answer

If the price goes up for a product, a consumer will buy less of that product and more of another substitute

question

Income Effect

answer

If the price goes down for a product, the purchasing power increases for consumers, allowing them to purchase more

question

Law of Diminishing Marginal Utility

answer

As you consume anything, the additional satisfaction that you will receive will eventually start to decrease

question

5 Shifters of the Demand Curve

answer

1. Tastes and Preferences
2. Change in Related Goods (Compliment/Substitute)
3. Change in Income
4. Number of Buyers
5. Change in Expectations

question

Substitues

answer

Goods used in place of one another

question

Complements

answer

Two goods that are bought and used together

question

Inferior Goods

answer

Demand rises as income falls//Demand falls as income rises//Ex. Ramen, McDonalds purchases, used cars

question

Normal Goods

answer

Goods that consumers demand more of when their incomes rise and less of when their income falls

question

Supply

answer

The different quantities of a good that sellers are willing and able to sell (produce) at different prices

question

Law of Supply

answer

There is a positive relationship between price and quantity supplied

question

6 Shifters of the Supply Curve

answer

1. Input (Resource) Price and Availability
2. Related Goods and Services
3. Expectations of Future Profit
4. Number of Sellers
5. Change in Technology
6. Government Action (Taxes&Subsidies)

question

Taxes

answer

Supply goes down

question

Subsidies

answer

A government payment that supports a business or market//Supply goes up

question

Concepts to Know

answer

How to calculate the difference between marginal utility/benefit and total utility/benefit

question

Price

answer

Price does not shift the demand curve//Price change just means you move along the line

question

Maximize Utility

answer

The consumer's money should be spent so that the marginal utility per dollar of each good equals each other

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