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Flashcards in séance 2 Deck (39)
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1
Q

what is the definition of individual demand?

A

A consumer’s individual demand is the relationship between the price and the quantity purchased at that price

2
Q

what is the rule for buyers when thinking at the margin?

A

buyers will buy as long as MV(q)>P

3
Q

the MV(q) curve also represents the …

A

MV(q) curve = demand curve d(q)

4
Q

how to compute consurmer surplus?

A

CS = total valuation - expenses

5
Q

when does consumer maximizs profit?

A

when P=MV(q)

6
Q

TF: thinking at the margin doesn’t give the same result as surplus maximization

A

F: surplus maximization gives the same results as thinking at the margin

7
Q

on the graph, what represents the total valuation?

A

surface under the MV(q) curve up until the qty bought

8
Q

what is the link between valuation and individual demand

A

Because an individual will choose q such that MV(q) = P, the consumer’s demand curve coincides with her marginal valuation curve.

9
Q

what is the definition of qty demanded

A

The quantity demanded of a good is how much of that good an individual or a population is willing and able to purchase, at a given price.

10
Q

what is the definition of demand?

A

The demand for a good is the relationship between the price and the quantity demanded of that good

11
Q

define the particularities of the law of demand

A

for most goods, the demand curve is downward sloping: price and qty are inversely related. holding other things equal, a consumer will want to purchase more of a good as its price goes down

12
Q

what is market demand?

A

it is the aggregate demand of an entire population

13
Q

what is the market qty demanded?

A

it is the sum of qties demanded by all individuals

14
Q

what does the market demand curve represents?

A

it represents the horizontal sum of all individual curves (you obtain it by adding qties, never add prices)

15
Q

what is to be considered when looking at the demand function?

A

the demand fct explains how the qty demanded for a good varies when the price of the good changes, supposing that all other factors potentially affecting demand are all held constant

16
Q

what is the exception to the law of demand?

A

luxury goods (Veblen goods) or essential goods, like life saving medecine (giffen goods): ppl sitll buy even if the price goes up

17
Q

what happens when the price of a substitute good goes up ?

A

ppl buy more of the other good

18
Q

what happens when the price of a complement goes up?

A

ppl buy less of the good

19
Q

what happens with demand for normal and inferior goods when income goes up?

A

the demand for normal goods goes up and the demand for inferior goods goes down

20
Q

what are the 4 factors affecting demand?

A

1- the price of the good (law of demand and exceptions)
2- the price of other goods (substitutes and complements)
3- household income
4- other factors (time of the year, weather, laws, etc)

21
Q

what is the only factor that can cause a mvmt along the demand curve of a good?

A

a change in the price of the good will cause mvmt along its demand curve

22
Q

a change in a factor other than the price of the good leads to…

A

A change in a factor other than the price of the good leads to a shift (to the left or to the right) of the demand curve.

23
Q

what is price-elasticity of demand?

A

price-elasticity of demand is a measure of the responsiveness of qty demanded to its price

24
Q

what is the interpretation of price-elasticity of demand?

A

the price-elasticity of demand is the percentage change in Qd when P increases by 1%

25
Q

how to compute price-elasticity of demand?

A

Ep = (delta Q / delta P) x P/Q

26
Q

the value of the elasticity of demand depends on…

A

where we are on the demand function curve

27
Q

what is the value of Ep when it is perfectly elastic ?

A

Ep = -infinite

28
Q

what is the value of Ep when it is perfectly inelastic ?

A

Ep = 0

29
Q

what is the value of Ep when it is unit elastic ?

A

Ep = -1

30
Q

what is the value of Ep when it is relatively elastic ?

A

-infinite < Ep < -1

31
Q

what is the value of Ep when it is relatively inelastic ?

A

-1 < Ep < 0

32
Q

graphically, perfectly elastic demand curve are… which means…

A

horizontal, which means that a small change in price causes a large change in qty demanded

33
Q

graphically, perfectly inelastic demand curve are… which means…

A

vertical, which means a change in price will not affect qty demanded

34
Q

what is the income elasticity of demand (Ei)?

A

it is the relative change in Qd is response to a 1% change in income

35
Q

if Ei>0, the good is…

A

If EI > 0, the good is normal

36
Q

If Ei < 0, the good is …

A

If EI < 0, the good is inferior

37
Q

what is the cross price elasticity (Ec)?

A

The cross-price elasticity is the percentage change in Qd of a good X in response to a 1% change in the price of another good, PY

38
Q

if Ec < 0, the good X and Y are…

A

If Ec < 0, the goods X and Y are complements

39
Q

if Ec > 0, the good X and Y are…

A

If Ec > 0, they are substitutes