Unit 2 Questions

If the price of an item goes up what would suppliers generally do?

Supply less

Determinants of Demand

Taste Income Related goods Expectations Size

Determinants of Supply

Technology Input price Government Expectations Related weather Sellers

How do prices help a market economy adjust to unexpected event?

by adjusting consumption and production

Marginal Cost

the extra cost associated with the addition of one of more units

What are the reasons that prices effectively perform the allocation function?

1.) prices favor neither the producer nor consumer 2.) prices are easily understood 3.) competitive markets find their own prices without interference

What would cause a decrease in demand or the demand curve to shift to the left?

Decreases in demand. Conversely, demand can decrease and cause a shift to the left of the demand curve for a number of reasons, including a fall in income, assuming a good is a normal good, a fall in the price of a substitute and a rise in the price of a complement

Macroeconomics

Study of concerned with large scale or general economic factors, such as interest rates and notational productivity.

Microeconomics

Study of how households and firms make decisions and how they interact in markets

Would each of the following cause a surplus or shortage?

a. Price is higher than equilibrium-Surplus b. Price is lower than equilibrium- Shortage c. Equilibrium is below the price- Surplus d. Equilibrium is above the price- Shortage e. Demand exceeds supply- Shortage f. Supply exceeds demand- Surplus g. Supply is below demand- Shortage h. Demand is below supply- Surplus

What kinds of goods are more likely to be inelastic?

needs (gas, medicine)

What would cause a change in demand?

number of consumers

What would cause a change in supply?

number of sellers

Demand

refers to consumer willingness and ability to buy products

What is the difference between a change in supply and a change in quantity supplied?

supply - factors that cause a change in the outcome of affecting supply quantity supply - caused by a change in price (if it goes up quantity goes down)

Marginal Utility

the extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product Marginal benefit- the extra benefit associated with the addition of one or more units

Break-Even Point

the point where total revenue equals total cost equal zero

Demand Schedule

A table that lists the quantity of a good people would buy at different prices

What would cause an increase in demand or the demand curve to shift to the right?

Increases in demand are shown by a shift to the right in the demand curve. This could be caused by a number of factors, including a rise in income, a rise in the price of a substitute or a fall in the price of a complement.

What would cause a quantity supplied to go up?

Input costs going down

What is the extra cost incurred when a business produces 1 additional unit of a product?

Marginal Cost

What would cause a decrease in supply and the supply curve to shift to the left?

Weather Issues

What would cause quantity demanded to go up?

change of price

Marginal analysis is a type of decision-making that compares what?

Marginal Cost to Marginal Benefit

What are some factors that determine demand elasticity?

Needs vs. Wants, Responsive Level to Change in Price

What would cause an increase in supply and the supply curve to shift to the right?

New Technology

What is it called when total revenue and total cost are the same?

Normal Profit

Subsidies

Payments from the government to the business or farmers. Often when subsidy is offered on a product, supply will increase

What is it called when marginal cost and marginal revenue are equal? Why is this significant?

Profit Maximization

What is the difference between a change in demand and a change in quantity demanded?

Quantity demaded- A change in quantity demanded results from a change in price and moves along the demand curve. The only factor that influences quantity demanded is price. Demand- Common factors that can cause a shift in the demand curve include a consumer's income, age, gender and personal characteristics. A shift in the demand curve may also result from a change in weather, the introduction of competing products, or an external event, among others.

Unit Elastic

a given change in price causes a proportional change in quantity demanded

Income Effect

there is a change in quantity demanded as price changes... as something gets cheaper we have more money left over to buy more of that item

Overhead

total fixed cost

Substitutes

two goods for which an increase in the price of one leads to an increase in the demand for the other

What kinds of goods are more likely to be elastic?

wants (candy bar, etc)

Substitution Effect

when consumers react to an increase in a good's price by consuming less of that good and more of other goods