Eco 202 first exam
autoworkers negotiate a wage increase, how does this change affect the supply of cars
it decreases the supply
what are the factors or production
land labor capital human capital entreprenurship
a shortage occurs when the price is
less than the equilibrium
when A1 makes the statement "the cost of living has increased 10 perfect over the past 10 years" he is
making a positive statement
what does ceteris paribus mean?
means all other things being equal. meaning in the law of gravity, if you throw something down on the ground. ceteris paribus. gravity will allow that object to fall if nothing else changes.
difference between microeconomics and macroeconomics
micro: the study of specific parts of an economy like firms, industries, households macro: deals with the economy as a whole or large
movement along demand curve
moving up or down he demand curve. a change in the price of the product
ceteris paribus
other things being equal--- all other relevant things remaining the same
law of supply
other things remaining the same, the higher the price of a good, the grater is the quantity supplied of it
all normal goods have
positive income elasticities of demand
difference between positive and normative statement
positive: consists of objective and/or empirically verifiable statements. deals with "what is" normative: consists of subjective and/or unsubstantiated statements that lack positive knowledge.
what shifts the supply
price of other goods Related in supply price of resources used in production of the good wages. number of suppliers technology weather expectations
the most fundamental economic problem is..
scarcity
demand is perfectly inelastic when
shifts of the supply curve results in no change in quantity demanded.
a substitute is a good
that can be used in place of another good.
quantity demanded
the amount of a good or service that consumers plan to buy during a given time period at a particular price
quantity supplied surplus
the amount of a good or service that producers plan to sell during a given time period at a particular price
shift in demand curve
the curve shifts left if decrease, right if increase. depends on ceteris paribus
on a linear demand curve that intersects both axes
the elasticity decreases as the price falls and quantity increases.
opportunity cost
the highest called alternative that we give up to get something
the opportunity cost of something you decide to get is
the highest valued alternative you give up to get it
relative price
the ratio of the price of one good or service to the price of another good or service. opportunity cost
factors or production
the resources used to produce goods and services
normative statements are statements about
what ought to be
when the price of a hot dog rises 10%, your expenditure on hot dogs increases. hence, it is certain that
your demand for hot dogs is inelastic
what countries in the world would be classified as capitalist and why
USA, Canada, Germany. they are controlled by a private operator like a president or prime minister
which of the following decreases the supply of popcorn?
a decrease in the number of popcorn suppliers
economic theory
a generalization that summarizes what we think we understand about the economic choices that people make and performance of industries and entire economies
inferior good
a good for which demand decreases as income increases
normal good
a good for which demand increases as income increases
market forces
a good that can be used in place of another good
the law of demand implies that if nothing else changes, there is
a negative relationship between the price of a good and the quantity demanded.
ceteris paribus is the latin expression for
an expression that means "other things being equal"
if goods are compliments, definitely their
cross elasticities are negative.
the demand curve for normal good shifts leftward if income________ or the expected future price ______
decreases, falls
if more people buy battery car, price of oil will go _____
down
when the price is below the equilibrium price, the quantity demanded
exceeds the equilibrium quantity. the quantity supplied is less than the equilibrium quantity.
normal goods
good that experiences increase in demand when income increases
a surplus occurs when the price is
grater than the equilibrium
an increase in Abigail's income decreases her demand for cassette tapes. for her, cassette tapes are
inferior good
the slope of a demand curve depends on
the units used to measure price and the units used to measure quantity.
total revenue
the value of a firm's sales. it is calculated as the price of the good multiplied by the quantity sold.
substitue good
when price of good falls, consumers are more willing to substitute this good with other goods.
what is likely to have the smaller price of elasticity of demand
automobile
scarcity requires the people must
make choices
a 10 percent increase in the quantity of spinach demanded results from a 20 percent decline in its price. the price os elasticity of demand for spinach is
0.5
a shift of the supply curve of oil raises the price of oil from 9.50 a barrel to 10.50. and reduces the quantity demanded from 41 million to 39 million barrels a day. the price of elastic of demand for oil is
0.5
during the summer you have made the decision to attend summer school, which precludes you from working at your usual summer job in which you normally earn 6,000 for the summer. your tuition cost is 3,000 for books and supplies cost 300 and room and board cost 1,000. the opportunity cost of attending summer school is.
10,300
the law of demand implies that other things remaining the same,
as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease.
complementary good
a good that can be used together with another good
inferior goods
a good that experiences a decrease in demand when income increases
complement
a good that is used in the conjunction with another good
because we face scarcity, every choice involves
an opportunity cost
if good A is a normal good and income increases, the equilibrium price of A
and the equilibrium quantity will increase
what is not an example of opportunity cost?
because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment.
what determines the quantity of a product or service
by holding other prices constant any change in the money price of the good represents change.
what is difference between capitalist and socialist
capitalist: can afford economic freedom, economic growth. socialist: controlled by a state and planned by central planning authority
what countries are communist and why
china, North Korea, Cuba. they are governed by a single party.
countries classified as socialist
china, canada, Mexico, sweden
donuts and coffee are complements. when the price of a donut increases, the demand for coffee _____ and the cross elasticity of demand for coffee with respect to the price of a donut is___
decreases, negative.
a decrease in the price of a game of bowling shifts the
demand curve for bowling balls rightward
how can you tell if a movement reflects an increase in demand?
demand curve shifts to the right
by reviewing its sales records, IBM economists discover that when it lowers the price of its personal computers, the total revenue IBM obtains from the sale of its personal computer rises. hence
demand for IBM personal computers is elastic
which of the following is an example of a positive statement?
households are the primary source fo saving
what shifts a demand curve
income price of related good taste population weather expectations
if a good is an inferior good, then purchases of that good will decrease when
income increases.
an increase in the quantity of oil supplied but NOT in the supply of oil is shown by a movement by...
increase from the first point to above on the same line.
if OPEC cuts oil production to increase total revenue, they know the demand for oil in the global market is
inelastic
ceteris paribus means
other things being equal
what determines quantity supplied
price of the product
a surplus causes the
price to fall
a shortage causes the
price to rise
demand
the entire relationship between the price of the good and the quantity demanded of it when all other influences on buyers plans remain the same.
goods A and B are complementary goods. the cost of a resource used in the production of A decreases. as a result
the equilibrium price of B will rise and the equilibrium price of A will fall.
the more substitutes available for a good or service
the larger is its price elasticity of demand
demand is inelastic if
the leftward shift of the supply curve raises the total revenue
money price
the number of dollars that must be given up in exchange for a good or service
equilibrium price
the price at which the quantity demanded equals the quantity supplied
what describes the price of elasticity of demand
the price elasticity of demand is larger at point A than at point B
producers total revenue will decrease if
the price rises and demand is elastic
equilibrium quantity
the quantity bought and sold at the equilibrium price
income elasticity of demand
the responsiveness of demand to a change in income, other things remaining the same.
economics
the social science that studies the choices that we make as we cope with scarcity an the incentives that influence and reconcile those choices
what is economics?
the study of the allocation of scarce resources
microeconomics
the study of the choices that individuals and businesses make, the way these choices interact in markets, and the influence of governments