question
Opportunity costs
answer
Sacrificing something to get something else
question
Scarcity
answer
Scarce resources cause limited goods and services
question
Utility
answer
Pleasure from consuming a good or service
question
Microeconomics
answer
Individual units
question
Production possibility curve
answer
Compares the production possibility combinations of 2 products
question
Optimal allocation
answer
MB = MC
question
Market system
answer
Capitalism
Private property, freedom of enterptise, freedom of choice, self-interest, competition
Private property, freedom of enterptise, freedom of choice, self-interest, competition
question
Command system
answer
Socialism/communism
Government control of property, central economic plan
Government control of property, central economic plan
question
5 economic questions
answer
1. What will be produced?
2. How will it be produced?
3. Who will get the output?
4. Who will accomodate the system?
5. How will the system promote progress?
2. How will it be produced?
3. Who will get the output?
4. Who will accomodate the system?
5. How will the system promote progress?
question
Law of demand
answer
Price increase - demand decrease
Price decrease - demand increase
Price decrease - demand increase
question
Law of Diminishing marginal utility
answer
Each buyer will receive less satisfaction from each unit bought
Explains law of demand
Explains law of demand
question
Income effect
answer
Lower prices increase buying power from income
question
Substitution effect
answer
People will buy the cheaper of 2 substitute goods
question
Determinants of demand
INSECT
INSECT
answer
Income
Number of customers
Substitute goods
Expectations
Complimentary goods
Taste & preference
Number of customers
Substitute goods
Expectations
Complimentary goods
Taste & preference
question
Superior goods
answer
Demand varies with income
Income increase - demand increase
Luxury car
Income increase - demand increase
Luxury car
question
Normal good
answer
Income increase - demand increase
Magazine
Magazine
question
Inferior good
answer
Based on affordability Income increase - demand decrease
Taking bus
Taking bus
question
Law of supply
answer
Price increases - quantity supply increases
question
Determinants of supply
PETTING
PETTING
answer
Productivity
Expectation
Taxes & subsidies
Technology
Input cost of resources
Number of suppliers
Government regulatiom
Expectation
Taxes & subsidies
Technology
Input cost of resources
Number of suppliers
Government regulatiom
question
Market equilibrium
answer
Demand = Supply
question
Rationing function of prices
answer
Supply and demand establish a price wherr thr buying and selling is consistent
question
Allocated efficiency
answer
Goods produced are the most valuable
question
Price ceiling
answer
Maximum legal price of a product
question
Price floor
answer
Minimum legal price of a product
question
Elastic
answer
Want
Many Substitutes
Many Substitutes
question
Inelastic
answer
Need
Less substitutes
Less substitutes
question
Market period
answer
How long it takes supplier to respond to market prices
Inelastic - no time to adjust
Inelastic - no time to adjust
question
Elasticity
answer
Measure of responsiveness of 1 valuable to another
question
Midpoint formula
answer
Measure elasticity
Ed = chang
Ed = chang
question
Elastic demand
answer
Price decrease - revenue increase
Ed >0
Ed >0
question
Inelastic demand
answer
Price decrease - revenue decrease
Ed < 0?
Ed < 0?
question
Unit elasticity
answer
Change in price - no change in revenue
Ed =1
(Maximum revenue)
Ed =1
(Maximum revenue)
question
Perfectly inelastic
answer
Change in price - no change in demand
Ed = 0
Ed = 0
question
Perfectly elastic
answer
Small price change - increase in purchases
Ed = infinity
Ed = infinity
question
Total revenue test
answer
TR=PQ
question
Cross elasticity
answer
How elastic a product is in reference to a change in price to another good
+ substitutes
- complimentary
0 unrelated
+ substitutes
- complimentary
0 unrelated
question
Income elasticity
answer
Degrer of elasticity of a product in respect to change in income levels
+ normal
- inferior
+ normal
- inferior
question
Consumer surplus
answer
Amount saved
Difference between the maximum price a customer is willing to pay and the actual price
Difference between the maximum price a customer is willing to pay and the actual price
question
Producer surplus
answer
Profit
Difference between the market price and the minimum accepted price / willing to sell
Difference between the market price and the minimum accepted price / willing to sell
question
Deadweight loss
answer
Money that couldve been spent
Underproduction or overproduction
Aside from cs+ps
Underproduction or overproduction
Aside from cs+ps
question
The circular flow
answer
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