2: microeconomics Flashcards
what is the definition of economics
economics is the study of allocation of scarce economic resources– labor, capital, natural resources– among alternative uses
what is definition of microeconomics
of distinct decision marking entities including individuals, households, and business firms
what is definition of macroeconomics
a group of entities taken together, typically of an entire nation or major sectors of a national economy
what is international economics
economic activities that occur between nations and outcomes that result from these activities
what is a command economic system
the government largely determines the production, distribution, and consumption of goods and services
what is a market economic system
individuals, business, and other entities determine production, distribution and consumption of goods and services
what is demand and the fundamental law of demand
demand: the desire, willingness and ability to acquire a commodity
law of demand: the price of a product and the quantity demanded of the product have an inverse relationship. as price falls, aggregate demand for a commodity increases
changes in other market variables that may change demand include:
size of market, income or wealth of market participants, preferences of market participants, changes in price of other goods and services.
what is supply and the fundamental law of supply
supply: the quantity of a commodity provided either by an individual producer or by all producers of a good or service at alternative prices during a specific time
law of supply: price and quantity supplied are positively related. the higher the price received for a good, the more quantity sellers are willing to produce.
what changes would cause a increase in supply curve?
increase in technology
decrease in cost of production input
increase in number of manufacturers
what is price ceiling
market shortage. a price is established above equilibrium price, prices are artificially low, and more quantity is demanded than supply is available
what is price floors
market surplus. a price is established above equilibrium price, prices are artificially high and less quantity is demanded than is available
define price elasticity of demand
the percentage change in the quantity demanded/ percentage change in price
what quantitative values indicate the following?
inelasticity
elasticity
unit elasticity
inelasticity: when the absolute value of the elasticity calculation is 1
unit elasticity: when the absolute value of the elasticity calculation is 1
If demand for a product is elastic, what would be the effect of a price increase and a price decrease on total revenue (TR) generated
elastic demand: price increase= decrease in revenue
inelastic demand: price decrease=decrease in revenue
think inelastic=income (i-i)
