ECO exam 1

In what year was OPEC, the organization of petroleum exporting countries, formed?

1960

What decrease in supply?

An increase in the price of an input

Complements

An increase in the price of one good leads to a decrease in the demand for the other

Substitutes

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

Assume plastic lawn furniture is an inferior good. If the incomes of consumers increase, equilibrium price of plastic furniture_______ In the equilibrium quantity of plastic furniture decreases.

Decreases

What does a tax do to the supply?

Decreases supply

Inferior good

Demand decreases when income increases

Normal goods

Demand increases when income increases and vice versa.

Shortage

For a shortage, quantity demanded must be greater than quantity supplied

An increase in supply

Greater quantity supplied at the same price, willing to sell same quantity at lower prices

Expectations

If people expect the price to be higher it will increase the demand today but if they expect it will be lower in the future it will decrease demand today

Important demand shifters

Income, population, price of substitutes, price of complements, expectations,Tastes

A surplus occurs when the _______ is greater than the quantity demanded

Quantity supplied

Quantity demanded

Quantity that buyers are willing and able to purchase at a particular price

Who competes with whom to determine the price of a good?

Sellers compete with sellers and buyers compete with buyers

demand curve

Shows how much people want at different prices, Quantity demanded increases as the price gets lower

Decrease in supply

Smaller quantity supplied at the same price, higher price needed to sell same quantity

Decrease of demand on a graph

Swift inward toward the origin, at any given price there's less quantity demanded, any given quantity there's a lower willingness to pay

Which statement about a market at equilibrium price and quantity is false?

The Market could not have achieved equilibrium without government interference

At high prices

The demanders left are the ones that value oil for ex. The most

From the early 20th century to the 1970s:

There were modest declined it oil price

Increase in demand means

There's a greater quantity demanded at the same price, Or a greater willingness to pay for the same quantity

Which economist began testing supply and demand model by running experiments with his undergraduate students in 1956?

Vernon smith

The use of laboratory experiments in economics:

Was pioneered by Vernon Smith, who used his undergraduate economics students as his first test subjects in the 1950s.

Demand vs. Quantity Demanded

A change in demand is when the whole curve shifts and a change in quantity demanded is movement along the demand curve due to a change in price. Price Doesn't shift the curve.

Prices below the equilibrium can be known as

A shortage, they drive prices up

What would cause an increase in demand?

Anything that increases the quantity demanded at a given price or that increases the maximum willingness to pay for a given quantity

Deadweight losses

Are larger than more elastic the demand curve because if the demand is inelastic a tax will not deter many trades

Shortage

Buyers compete by bidding up the price, price rises until equilibrium is reached

Buyers and sellers

Buyers compete with buyers and sellers compete with sellers

Which statement accurately describes a competition that determines the price of a good

Buyers compete with buyers driving the price of a good app to equilibrium price

How can quantity of oil increase in a supply curve

Exploit higher cost sources of oil

If there's tax equilibrium quantity must

Fall and the price sellers receive must fall

Supply curve

How much sellers will supply at different prices, price goes up quantity that companies are willing to supply increase

For government to discourage people from eating junk food when will their need to be a higher tax rate when junk we demand is elastic or elastic

Inelastic

Consumer surplus

Is the consumers gain from exchange The difference between the maximum price a consumer is willing to pay for a given quality and the market price

What does it mean that elasticity equals escape?

It is easy for market participants to escape to another market if they have elastic demand or supply

Technological innovation

Lowers costs and increase supply

An increase in demand would what

Move the line towards the right and up

An increase in quantity demand is a

Movement along a fixed demand curve caused by a rightward shift in the demand curve

Producer surplus

Producers gain from exchange, difference between the market price in the minimum price at which producers would be willing to sell a given quantity

Quantity supplied

Quantity that produces are willing and able to sell at a particular price

Supply curve

Represents the behavior of sellers, function that shows the quantity supplied at different prices, The minimum price at which suppliers will sell a given quantity

Surplus

Sellers can't sell as much as they would like to add the going price so they Lower their price until they equal other sellers

What would happen if the supply of oil decreased?

The market price would rise

What happens when the prices are above equilibrium price?

The prices above would be the surplus

Total consumer surplus

The sum of consumer surplus of all buyers, Measured by the area below the demand curve and above the price. 1/2 (baseXheight)

I'm the early 20th century to the 1970s major oil discoveries and improve production techniques meantt that

The supply of oil increased even faster than the demand for oil, if supply increases faster than demand, then it will keep the price relatively lower

Deadweight loss is

The value of trades not made because of the tax

Equilibrium price is where

Where the quantity demanded is equal to the quantity supplied, the only place where the price is stable

What is caused by a shift in the supply curve?

A movement along the demand curve, supply side shifts cause changes in quantity demand it.

Supply Shifters

Changes in costs, technological innovations, and input prices, taxes and subsidies, expectations, entry or exit of producers, changes in opportunity costs

For tax to actually deter people from eating junk food some junk food demand be elastic or inelastic

Elastic

If government is hoping that a small tax could actually discourage a lot of junk food purchases, it should hope for

Elastic supply and elastic demand

The _____ Price occurs when the quantity demand it is equal to the quantity supplied

Equilibrium

Subsidy

Equivalent to a decrease in the firm's cost and therefore increase supply

If there's tax the Equilibrium quantity must

Fall and the price that buyers pay must rise

Total producer surplus

The sum of the producer surplus of each seller, It's measured by the area above the supply curve and below the price