micro CRAM unit 2
Studied by 0 people
Learn
Practice Test
Spaced Repetition
Match
Flashcards1/43
There's no tags or description
Looks like no tags are added yet.
Name | Mastery | Learn | Test | Matching | Spaced |
|---|
No study sessions yet.
44 Terms
demand
the amount of different quantities people are willing and able to buy at different prices
law of demand
shows inverse relationship b/n price and quantity demanded
demand is downward sloping because…
income effect, substitution effect, and law of diminishing marginal utility.
a change in quanitity demanded is _________, and a change in demand is when _________.
when price changes, 2. something other than price influences demand.
MERIT
market size
expectations
related prices
income
tastes and preferences
supply
amount of different quantities people are willing and able to produce at different prices
law of supply
direct relationship b/n price and quantity supplied
a change in quantity supplied is when _______,
and a change in supply is when _______.
price changes, 2. something other than price influences supply.
TRICE
technology
related prices (subsided and taxes)
input prices
competition
expectations of future profit
elasticity
since law of demand tells us that when price increases ppl want less, ELASTICITY says how much less they want.
Price Elasticity of Demand (PED)
%change in Qd//%change in price
total revenue test
quick way to see how elasticity affects total revenue
total revenue
price X quantity
if elastic…
price increase means TR decrease (vice versa)
if inelastic…
price increase means TR increase (vice versa)
if unit elastic …
no change
law of supply says that if price increases, producers will want to produce more, elasticity tells us how much more
—
price elasticity of supply (PES)
% change in quantity supplied//% change in price
%change in =
new # -- old #//old # X 100
cross price elasticity of demand (XED)
figuring out if something is a substitute or complement
XED = %change in quan. of product 1//%change in price of product 2
if XED is positive…
substitute - if lucky charms price increases, I grab cheerios
if XED is negative…
complement - if lucky charms price decreases, I will buy more milk
income elasticity of demand (YED)
measures how much an income change changes demand
% change in quantity//% income in price
if YED is positive…
normal good - I got a raise so I buy lucky charms
YED is negatie…
inferior good - I lost my job so I buy magical treasures
market equilibrium
the highest price buyers are willing and able to pay for the lowest price producers are willing and able to produce for
disequilibrium
price is set outside of the equilibrium
when QS > QD…
it is a surplus
When QD > QS…
it is a shortage
consumer surplus
buyers maximum price- the listed price
producer surplus
the listed price - the suppliers minimum price
PS and CS are volume
1/2B (H)
double shift
supply and demand both shift; one will be always be indeterminate
deadweight loss
lost sales/oppurtunity
price ceiling
keeps prices BELOW equilibrium
price floor
keeps prices ABOVE equilibrium
excise tax
a per unit tax on producers
lump sum tax
fixed tax that everyone pays, no matter how much $ they earn or spend
ex: govt has a lump sum tax of $100
someone earning $1,000 pays $100 tax
someone earning $10,000 pays $100 tax
do lump sum taxes shift the curve?
No they do not, only per unit taxes shift the curve
taxes on a graph will always be …
VERTICAL
world price
foreign prices might be lower than domestic prices
public policy
gov’t can limit imports (quotas) or put a tax on imported goods (tariffs)
no DWL means …
efficiency
Note 
Flashcards (49)