question
Draw a supply and demand curve. What happens if there is an increase in the number of buyers in the market? Also identify which DOD or DOS applies.
answer
Changes to a Buyers' Income is a Determinant of Demand (DOD) that increases demand and therefore shifts the D(demand) curve to the right then causing price to rise and the Qs to increase.
question
Draw a supply and demand curve. If consumer income rises what happens? Also identify which DOD or DOS applies.
answer
Changes to a Buyers' Income is a Determinant of Demand (DOD) that increases demand and therefore shifts the D(demand) curve to the right.
question
Draw a supply and demand curve for inferior goods. What happens if consumer income rises? Also identify which DOD or DOS applies.
answer
Changes to a Buyers' Income is a DOD that would normally increase demand shift the D curve to the right; however because dealing with an inferior good the D curve shifts to the left. The higher your income the fewer inferior goods you buy, the lower your income, the more you buy.
question
Draw a supply and demand curve for hamburgers. What happens if the price of pizza (it's substitute) increases? Also identify which DOD or DOS applies.
answer
Changes to the Price of a Substitute is a DOD and will increases demand for hamburgers shifting the D(demand) curve to the right. If people buy less pizza because it costs more they'll buy more of it's substitute hamburger, thus increasing its demand.
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Coke and Pepsi are examples of?
answer
Substitutes
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Computers and Software are examples of?
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Complements
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Draw a supply and demand curve for software. What happens if the price of computers increase? Also identify which DOD or DOS applies.
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Changes to the Price of a Complement is a DOD and will decrease demand for software shifting the D(demand) curve to the left. If people buy fewer computers because they cost more they'll buy less software because they need the computer to need the software, thus decreasing its demand.
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Eggs and Bacon are examples of?
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Complements
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Draw a supply and demand curve. What happens if Nike's sales increase because of a Michael Jordan commercial that says they'll donate $1 of every purchase to cancer research? Also identify which DOD or DOS applies.
answer
Changes to a Buyers' Tastes/Preferences is a Determinant of Demand (DOD) that increases demand and therefore shifts the D(demand) curve to the right. Buyers purchase goods that satisfy wants and needs. Buyers are more willing to purchase those goods that provide greater satisfaction, for a given price. If the amount of satisfaction derived from a good changes, then buyers are inclined to change their demand.
question
What is the Procedure of Graphing Changes in Determinants of Supply and Demand?
answer
1.) Identify which (if any) determinant of demand and/or supply have changed.
2.) Make shifts in demand and/or supply curves (if any are necessary).
3.) Indicate on the graph the new equilibrium prices and/or quantities (if applicable) in the market.
2.) Make shifts in demand and/or supply curves (if any are necessary).
3.) Indicate on the graph the new equilibrium prices and/or quantities (if applicable) in the market.
question
What happens when there is a change in PRICE only while all other factors remain unchanged?
answer
Causes no changes to the D(demand) or S(supply) curves it changes QUANTITY demanded or supplied ONLY (Qd or Qs).
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What are the # of Buyers, Buyers' Income, Prices of Substitutes or Complements, Tastes/Preferences and Expectations all examples of?
answer
DOD
question
Draw a supply and demand curve for music downloads. What happens if the price of iPods fall? Also identify which DOD or DOS applies.
answer
Changes to the Price of a Complement is a DOD and will increase demand for music downloads shifting the D(demand) curve to the right. If people buy more iPods because they cost less they'll download more music because they need the music to listen to on the iPod, thus increasing their demand.
question
Draw a supply and demand curve for music downloads. What happens if the price of music downloads falls?
answer
Neither the D(demand) or the S(supply) curves shift. Because the price fell, the quantity DEMANDED will increase and be represented by MOVEMENT down along the D(demand) curve to a point with lower P(price), and resulting in a higher Q(quantity).
question
Draw a supply and demand curve for music downloads. What happens if the price of CDs falls? Also identify which DOD or DOS applies.
answer
Changes to the Price of a Substitute is a DOD and will decrease demand for music downloads shifting the D(demand) curve to the left. If people buy more CD's because they cost less they'll buy less of their substitute Music Downloads, thus decreasing their demand.
question
What is Microeconomics?
answer
The study of INDIVIDUAL choice under scarcity and its implications for the behavior of prices and quantities in INDIVIDUAL markets.
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What is Market Power?
answer
A firm's ability to raise the price of a good without losing all of its sales. (A company has more market power the more of each of the followng that it has; control of important inputs, patents or copyrights it holds, government licenses or franchises, enjoys economies of scale (natural' monopoly), and network economies apply to its operatons.
question
What temporary condition does a Increase in Demand create and how?
answer
It creates a "Temporary Shortage" by increasing the equilibrium price and quantity (shown as a rightward D curve shift). Qd > Qs
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What temporary condition does a Decrease in Demand create and how?
answer
It creates a "Temporary Surplus" by decreasing the equilibrium price and quantity (shown as a leftward D curve shift). Qd < Qs
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What temporary condition does a Decrease in Supply create and how?
answer
It creates a "Temporary Shortage" by increasing the equilibrium price and decreasing the quantity(shown as a leftward S curve shift). Qs < Qd
question
What temporary condition does a Increase in Supply create and how?
answer
It creates a "Temporary Shortage" by decreasing the equilibrium price and increasing the quantity(shown as a rghtward S curve shift). Qs > Qd
question
At what price does Market Equilibrium occur?
answer
Occurs at that price where buyers quantity demanded equals the sellers quantity supplied. Pe = Qd = Qs
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What does a market economy use prices for?
answer
To ration scarce goods and services that have alternative uses.
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When does "Demand" exist?
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When buyers have both the willingness and ability to buy at current market prices.
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What is a "Reservation Price" from the buyer's perspectve?
answer
The HIGHEST price a BUYER is willing to pay to obtain a good.
question
What is the "Law of Demand"?
answer
(ceteris paribus), if the price of a good increase buyers will buy less that good and vice versa; Price Increase = Qd decrease AND Price decrease = Qd increase
question
Gas prices may increase as a result of
answer
An increase in demand OR a reduction in supply
question
When does "Supply" exist?
answer
When sellers have both the willingness and ability to sell at current market prices.
question
What does the Price Elasticity of Demand measure?
answer
BUYER senstivity to changes in price. (% change in Qd) / (% change in P)
question
What does the Price Elasticity of Supply measure?
answer
SELLER senstivity to changes in price. (% change in Qs) / (% change in P)
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What does "Income Elasticity of Demand" measure?
answer
The responsivness of the demand for a good to a change in the income of the people demanding the good.
question
What does "Cross Elasticity of Demand" measure?
answer
The responsivness of the demand for a good to a change in price of a complement or substitute good.
question
In general, how is the slope is the Demand Curve of an Inelastic good?
answer
Steep
question
In general, how is the slope is the Demand Curve of an Elastic good?
answer
Relatively flat
question
Draw a supply and demand curve. What happens if several new firms enter the market supplying the good? Also identify which DOD or DOS applies.
answer
Changes to the Number of Suppliers in the Market is a DOS and will increase supply shifting the S(supply) curve to the right. If there are more suppliers then there is more supply.
question
Draw a supply and demand curve for RN's Employed in Patient Care. What happens if RNs discover they can make more money working as administrators? Also identify which DOD or DOS applies.
answer
Changes to the Opportunties for Profits in Alternative Production is a DOS and will decrease supply shifting the S(supply) curve to the left. If there is an opportunity to make more money in another market then the supply of nurses in this market will decrease.
question
Draw a supply and demand curve. What happens if a technological breakthrough makes production of this product cheaper? Also identify which DOD or DOS applies.
answer
Changes to the Production Technology is a DOS and will increase supply shifting the S(supply) curve to the right. If production is cheaper then we can produce more and supply increases.
question
Draw a supply and demand curve. What happens if the price of labor used in the production of this product rises? Also identify which DOD or DOS applies.
answer
Changes to the Prices of Inputs to Production (Labor) is a DOS and will decrease supply shifting the S(supply) curve to the left. Since the price of labor increased our production cost increased and we can't produce as many.
question
What is the "Law of Supply"?
answer
(ceteris paribus), as price rises, the quantity supplied rises; as prices falls, the quantity supplied falls
question
What is a "Reservation Price" from the seller's perspectve?
answer
The LOWEST price a SELLER would accept in payment for a good.
question
In The Firm and Costs of Production if the per-unit selling price is less than the Average Total Cost what happens to the supplier?
answer
They suffers losses.
question
In The Firm and Costs of Production if the per-unit selling price is equal to the Average Total Cost what happens to the supplier?
answer
They breaks even.
question
In The Firm and Costs of Production if the per-unit selling price is greater than the Average Total Cost what happens to the supplier?
answer
They make economic profit.
question
In The Firm and Costs of Production how do you calculate TOTAL costs (TC)?
answer
Fixed Cost (FC) + Variable Cost (VC) = Total Cost (TC)
question
How do you calculate consumer surplus?
answer
Value (V) - Price (P) = Consumer Surplus
question
What is the consumer surplus if the Price is $20 and the buyer perceives a value of $30?
answer
$30 (V) - $20 (P) = $10 Consumer Surplus
question
How do you calculate consumer surplus on a graph?
answer
Using the equilibrium line as the base of the triangle (formed by the D (demand) curve and the S (supply) curve). Take 1/2 Base (B) x Height (H)
question
How do you calculate producer surplus on a graph in an Open Economy?
answer
Use the world Trade equilibrium line as the base of the triangle (formed by the D (demand) curve and the S (supply) curve). Take 1/2 Base (B) x Height (H)
question
How do you calculate Producer Surplus (Profit Margin)?
answer
Price (P) - Cost of Production (C) = Producer Surplus / Profit Margin
question
The number of buyers in the market is an example of?
answer
DOD
question
Buyers' incomes is an example of?
answer
DOD
question
the prices of related goods is an example of?
answer
DOD
question
Buyer and / or Seller expectations is an example of?
answer
Determinant of Demand (DOD) AND Determnant of Supply (DOS)
question
Buyers' tastes and/or preferences is an example of?
answer
DOD
question
The number of suppliers in the market is an example of?
answer
DOS
question
The prices of inputs to Production is an example of?
answer
DOS (Land, Labor, Capital, Entrepreneurship)
question
The price of land is an example of?
answer
DOS (Prices of inputs to Production)
question
The price of labor is an example of?
answer
DOS (Prices of inputs to Production)
question
The price of capital is an example of?
answer
DOS (Prices of inputs to Production)
question
The price of Entrepreneurship is an example of?
answer
DOS (Prices of inputs to Production)
question
Production Technology is an example of?
answer
DOS
question
The cost of resources used to produce a good is an example of?
answer
DOS (Prices of inputs to Production)
question
taxes and subsidies are an example of a...
answer
DOS
question
Opportunities for profits in alternative production is an example of?
answer
DOS
question
resources prices is an example of?
answer
DOS
question
improvements in TECHNOLOGY is an example of?
answer
DOS
question
prices of other goods (substitution in production) is an example of?
answer
DOS
question
producer expectations is an example of?
answer
DOS
question
How do you calculate the Value Created?
answer
Value (V) - Cost of production (C) = Value Created
question
How do you calculate the total cost of production?
answer
Fixed Cost (FC) + Variable Cost (VC)
question
How do you calculate Average Cost (AC)?
answer
Total Cost (TC) / Output (Q)
question
In The Firm and Costs of Production, how do you calculate Average Variable Cost (AVC)?
answer
Variable Cost (VC) / Output (Q)
question
How do you calculate Average Fixed Cost (AFC)?
answer
Fixed Cost (FC) / Output (Q)
question
What is inelastic?
answer
A Type of elasticity where a change in price causes a relatively smaller change in the Qd.
question
unit elastic
answer
a type of elasticity where a change in price causes a proportional change in quantity demanded; slope = 1
question
How do you calculate profit?
answer
Total Revenue (TR) - Total Cost (TC)
question
What is the break-even point in The Firm and Costs of Production?
answer
The production level where total cost = total revenue.
question
Price Elasticity (Ep) less than 1 (0 - 0.99) is said to be?
answer
inelastic
question
Price Elasticity (Ep) greater than 1 (1.0 - infinity) is said to be?
answer
elastic
question
Price Elasticity (Ep) that is exactly 1.0 is said to be?
answer
unit elastic
question
Who bears the majorty of the tax burden and how can you tell?
answer
Whoever has the most inelastic (or steepest) curve will pay the majority of the tax.
question
What is consumer surplus?
answer
difference between market price and what consumers would be willing to pay. It is equal to the area above market price and below the demand curve.
question
What is the producer surplus?
answer
The difference between market price and the price that firms would be willing to supply the product. It is equal to the area below market price and above the supply curve.
question
What are some examples of land as DOS's?
answer
includes natural resources like mineral deposits, oil, natural gas, water, and land.
question
What are some examples of labor as DOS's?
answer
includes mental and physical talents of individuals that are used to produce products and services.
question
What are some examples of capital as DOS's?
answer
includes manufactured products such as welding machines, computers, and phones.
question
What is comparative advantage?
answer
one country has a lower opportunity cost of producing a good than another country.
question
When does Elastic Demand occur?
answer
When consumers are highly responsive to a change in price of the current item. Ed > 1
question
When does Inelastic Demand occur?
answer
When consumers are not highly responsive to a change in price of the current item. Ed < 1
question
What are Inferior Goods?
answer
A good for which demand will rise (fall) as incomes falls (rises), Examples include generic products, bus tickets, etc.
question
What happens in a Closed Economy?
answer
Consumption Possibilities = Production Possibilities
question
What happens in an Open Economy?
answer
Consumption Possibilities are greater than Production Possibilities
question
In the Total Revenue Test (Only performed for Demand NOT Supply) what does Price (P) and Total Revenue (TR) going the same direction equal?
answer
Inelastic
question
In the Total Revenue Test (Only performed for Demand NOT Supply) what does Price (P) and Total Revenue (TR) going the same direction equal?
answer
Elastic
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