Economics Mid-term

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

A change in quantity demanded represents a movement along the current demand curve, while a change in demand represents a shift in the entire demand curve.

What motivates producers and consumers in the black market?

A shortage and not have government regulations.

What is the usual result of a price floor?

A surplus.

Why are surpluses and shortages examples of disequilibrium?

Because if you have a surplus and there's too much of something then the quantity demanded is too low not meeting the quantity supplied. And when there is a shortage than the quantity then the quantity demanded is too high to meet the quantity supplied.

Four factors of production.

Capitol, Land, Entrepreneurship, and Labor.

What are the features of a traditional economy?

Clans working within to survive, everyone has a role that is formed and pasted down from previous generations.

Besides providing public goods, what two purposes can a government serve in a market economy?

Control the prices that the goods and services are sold at and, controlling the division of labor.

How does the concept of market equilibrium reflect the interaction of producers and consumers in a market?

Drive the price to a point where a quantity supplied and quantity demanded are equal.

What are the six factors that can affect supply?

Input cost: suppliers cost increase Labor productivity: increase productivity / decreased cost Technology: better technology can improve production Government actions: can help or hinder production Producer exceptions: future prices affect production Number of producers: more producers + more product

How do consumer expectations affect demand?

It affects demand because if you as a consumer expect something and it is not given than the consumers are more prone to buy less if any of the product.

How do input costs affect supply?

It affects the supply because if the cost to buy it from the manufacturers increases than they won't be able to buy as much therefore can't supply as must to the consumer and will have to increase the cost if it and less people will be willing to buy it and they'll make less profit from it.

What are the features of a mixed economy?

It features a blend of all of the economies, the government has control but so do the people

What does it mean to say that quantity supplied and price have a direct relationship?

It means that when the price increases the quantity demanded decreases, and when the price decreases the quantity demanded increases.

What do economists mean when they say that quantity demanded and price have an inverse relationship?

It means that you cannot have one without the other.

How are producers and consumers equally involved in the price system?

It's the interaction of supply and demand that determines the price.

What role does the government play in the economy's circular flow?

They collect taxes and give public goods and services.

Explain the difference between elastic and inelastic demand.

Elastic is when the increase or decrease in price leads to a large change in quantity demanded, while inelastic is when a change in price leads to a smaller quantity demanded.

What is proportional tax?

Everyone pays the same amount of taxes no matter your income.

What are the six factors that can change demand?

Income: People have more or less money to spend. Market size: Number of potential buyers changes. Consumer taste: Popularity increases demand. Consumer expectations: Possible future prices affect present buying. Substitute Goods: Some products are interchangeable. Complementary Goods: Some products are used together.

What are increasing and decreasing returns?

Increasing returns: each new worker adds more to total output than the last. Decreasing returns: each new worker causes total output to grow but at a decreasing rate.

What is regressive tax?

Lower income pay more taxes than higher income

What is a free enterprise system?

Market driven economy, capitalism

How do you determine elasticity of demand?

Percentage change in quantity demanded divided by percentage change in price

What is progressive taxes?

Places a higher percentage on those who make a higher income than on those who make a lower income.

What are some of the rights that must be protected for a free enterprise system to work?

Private property, legal equality, open opportunity, free contract

What problem makes public goods necessary?

Scarcity.

What are the four factors of production and how do they relate to scarcity?

The 4 factors of production are land, labor, capital, and entrepreneurship. They relate to scarcity because they are all effected by it in individual ways; land is effected because if their is a shortage than they would be able provide that land resource to the manufacture and wouldn't make an profit,

What are the advantages and disadvantages of a market economy?

The advantages are that you have choices and get profit the disadvantage are that no public defense, it focuses on the individual and not the overall good, and competition can run you out of the market.

What are the advantages and disadvantages of a command economy?

The advantages are the that you don't have to decisions about your basic needs and economic growth, the disadvantages is that you can't make decisions concerning your basic needs and economic growth.

Describe the circular flow model.

The circular flow model is a diagram that shows the distribution of money through out the economy. The first is the product market, next is the households, after is the factor market, then it is the business.

What is fiscal policy?

The federal governments use of taxes and government spending to affect the economy.

What role does the government play in a command economy?

The government provides basic needs for the people, and decides for them.

What is the relationship of total cost to profit?

The relationship is that cost is what you have to pay and the profit is what you have left over from the cost.

Explain the role of taxes in the US economy.

The role is so that the government uses it to pay for public goods and federal safety nets and they collect them from the citizens.

How do you calculate total cost, total revenue, profit, marginal cost, marginal revenue?

Total cost: fixed cost added with variable cost Total revenue: Price times total product Profit: Total revenue minus total cost divided by quantity Marginal cost: Divide the change in total cost by the change in total product. Marginal revenue: divide the number of items by the total revenue

What are the three types of economic systems?

Traditional, command, market, and mixed economy.

How do you determine the profit-maximizing level of production?

When the marginal cost and marginal revenue are equal.

When do prices serve as signals and incentives for producers to enter a market?

When the prices rise.

What are the features of a market economy?

You have choices, entrepreneurship, competition, and the consumers have the most control have the most control over the economy.

What is the difference between discretionary and mandatory government spending?

budgeted amount of money that must be set aside for certain programs or initiatives as set forth by the government, while the discretionary government spending is the proportion that the government spends on discretionary programs. The main difference is that mandatory is necessary while the discretionary is not.