Economics Chapter 4 and 5/Mr. Holland's class
MAIN IDEAS: 11. The price of home computers rises. According to the law of supply, manufacturers must respond to this price increase by ......
a. increasing computer production
EFFECTS OF ELASTICITY 1. The demands for luxury goods is highly ____________>
elastic
10. Measure of how consumers respond to price changes.
elasticity of demand
14. How many fewer shirts are sold at the new demand level for any given price?
200
DECIDING HOW MUCH TO PRODUCE 1. A firm will earn the most profit when the marginal __________is equal to the marginal _____________.
A firm will earn the most profit when the marginal revenue is equal to the marginal cost.
B. GOVERNMENT REGULATIONS 1. A government can put an _______ tax on goods to ___________ the supply of that good.
A government can put an excise tax on goods to reduce the supply of that good.
_______________ ________________ and changes in fashions or fads also affected demands
Advertising/publishing, consumer tastes and changes in fashions or fads also affected demands
Both the ___________effect and the ____________effect are factors that influence demand.
Both the substitution effect and the income effect are factors that influence demand.
Demand exists when consumers are willing to_____________and able to __________________.
Demand exists when consumers are willing to own something and able to pay for it..
WHY ELASTICITY MATTERS 1. Elasticity affects the _________that a company receives for selling its products.
Elasticity affects the total revenue that a company receives for selling its products.
ELASTICITY 1. Electricity is a measure of how much the ___________ for a product changes when the ___________changes.
Electricity is a measure of how much the demand for a product changes when the price _changes.
B. COST OF PRODUCTION 1. ____________costs remain the same, while __________costs change.
Fixed costs remain the same, while variable costs change.
3. _____________cost is the extra cost to produce one more unit.
Marginal
CHANGES IN DEMAND People buy more ___________ ___________and less ___________ ____________when their income goes up.
People buy more normal goods and less inferior goods when their income goes up.
2. _____________are goods that people use in place of one another.
Skateboards
DEMAND FOR GOODS 1. __________________are two goods that people buy together.
Skis and ski boots
CHAPTER 5 - THE LAW OF SUPPLY A. HOW MUCH LABOR? 1. _________is the ability and willingness of sellers to make things available for sale.
Supply
9. Excise tax
Tax on the production or sale of a good
The law of demand states that when the _____________of a good goes up, the _______________for the good goes down.
The law of demand states that when the price of a good goes up, the demand for the good goes down.
SECTION 3 - CHANGES IN SUPPLY A. COST OF RESOURCES 1. When the cost of resources go down, _______goods will be produced because it is __________to make the goods.
When the cost of resources go down, more goods will be produced because it is profitable to make the goods.
20. If a store owner notices that a demand for all types of bread has been dropping steadily over the last year, while the price has changed very little, what conditions might she be seeing?
a change in demand due to a popular low-carbohydrate diet
2. A demand curve is in the form of ______________________
a graphic representation of a demand schedule
DEMAND SCHEDULE AND DEMAND CURVE 1. A demand schedule is in the form of_______________________.
a table of the quantity of what people will buy
19. Farmer Brown has 10 dairy cows. Her feed costs go up, but milk production stays the same. What effects will it have on her supply?
a. None. Although she will raise prices to make up for the last revenue
4. The demand curve always slopes _______________ to the right
down
12. A sudden increase in fuel costs sparks a rise in both prices and demands for fuel-efficient cars. Yet it takes months for car companies to manufacture more cars. In this case, the supply of cars is....
a. inelastic
17. If the supply of a good is inelastic, producers will...
a. not change quantity supplied much if prices double
15. Fixed cost would include ....
a. rent
10. Marginal revenue
additional income from selling one or more unit of good; sometimes equal to price
3. Supply
amount of goods available
18. The price of cranberry juice suddenly increases. As a result, Glenda begins drinking more grape juice, which is less as expensive, but tastes just as good to her. In this case Glenda's elastic demand is due to....
availability of substitutes
USING THE GRAPH PROVIDED: 13. The table shows the marginal product of labor at a shoe factory. In order to maximize marginal returns, how many workers should be factory have making shoes?
b. 4
20. Big Publishing, Inc. is considering using e-mail instead of shipping printed materials to workers. How will this affect Big Publishing, Inc.?
c. It should lower costs and increase supply
16. Which of these events would indicate a movement along a supply curve for batteries?
c. battery manufacturers raise the price of a package of AA batteries from $3.50 to $3.95
3. f the price of a product goes up, demand for its complement will go _________________.
down
8. Supply curve
chart that lists how much if a good a supplier will offer at various prices
8. Two goods that are bought and used together.
complements
6. Variable cost
costs that rises or falls depending on the quantity that is produced
18. A steel mill has fixed costs of $100 per hour and variable costs of $50 per hour. What would happen to those costs if the mill closes?
d. the mill will no longer any costs because the mill is closed
14. When the eight worker is hired, the marginal product of labor becomes negative. This is because ....
d. there are more workers than are needed, disrupting output
2. At some point, adding more workers will cause total production to go up at a lower rate, which is known as ____________ ______________ _______________.
diminishing marginal returns
2. With new technology, the cost of production goes ________.
down
9. Not very sensitive to prices
inelastic
15. Your demand for a good is inelastic if you consider the good to be .....
essential
16. The substitution effect and the income effect describe...
factors that influence consumer buying choices
5. Regulation
government intervention in a market that affects the production of a good
4. Subsidy
government payment that supports a business or market
7. Supply schedule
graph of the quantity supplied of a good at various prices
13. Using the demand curve graph: The graph shows a shift in the market demand curve for a certain brand of shirts. The market demand curves predicts ....
how people will change the number of shirts they buy
6. Change in consumption that results when a price increase causes real income to decline
income effect
Population growth leads to an ____________in demand.
increase
2. The demand for things people need, such as medicine is ____________________.
inelastic
7. Good that consumers demand less of when their income increases
inferior goods
5. concept that consumers will buy more of a good when the price is lower and less when the price is higher
law of demand
3. A demand curve is only accurate for a given set of _____________
market conditions e.g: price
2. Table listing the quantity of goods that all consumers will buy at various prices
market demand schedule
19. Due to an increase in her rent, Isa needs to cut back in her spending on other items. Which of the following types of goods will Isa consume less of?
normal goods
17. Which of the following is the correct mathematical formula for calculating elasticity of demand?
percent change in quantity demanded/percent change in price
12. If you create a demand schedule for an individual and for a market for the same product, what will remain the same for both schedules?
prices of the good or service
2. A government __________ keeps the cost of producing a product low.
regulation
3. Another factor that affects elasticity of demand is the availability of ____________________.
substitutes
4. Goods that are used in place of another
substitutes
3. Consuming less of a good and more of another as a reaction to price increases
substitution effect
2. Total costs
sum of fixed costs and variable costs
MAIN IDEAS 11. A music store holds a one-day half-price sale on all CDs. Consumers react to the sale by buying more CDs than on a typical day. This action is an example of .....
the law of demand
2. When fixed costs are added to variable costs of production, you have the _______________cost.
total
2. Factories should keep producing as long as the _________ ____________ is greater than the variable cost of remaining open.
total revenue
TEST A - KEY TERMS AND CONCEPTS 1. Entire amount of money a company receives by selling goods and services.
total revenue
WHERE TO PRODUCE GOODS OR SERVICES 1. The cost of _________ or moving goods, is a key factor in where goods are produced.
transportation
4. If the price of a product goes up. demand for its substitute will go __________________.
up
TEST A 1. Diminishing marginal returns
when the marginal product of labor decreases as the number of workers increases
