762021
Description
Flashcards by IBMichelle, updated more than 1 year ago
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Created by IBMichelle
over 10 years ago
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| Question | Answer |
| Microeconomics | Concerns with the individual markets of the economy (i.e. the demand and supply of particular goods, services and resources.) |
| Market | An institution which permits interaction between buyers and sellers |
| Factor Market | A market where factors of production can be traded (e.g. labor market) |
| Financial Market | Includes stock market, the bond market and the foreign exchange market |
| Demand | The relationship between various possible prices and the corresponding quantities that consumers are willing and able to purchase per time period, ceteris paribus |
| Demand Curve | The horizontal summation of all the individual demand curve (simply by adding the quantities demanded by each individual) |
| Consumer's Utility | The satisfaction derived from consuming a good or a bundle of goods |
| Supply (of a good) | The relationship between various possible prices and the corresponding quantities that firms are willing to offer per period, ceteris paribus |
| Supply Curve | Refers to the positive relationship between price per unit and quantity supplied (may also reference either an individual firm or an entire market) |
| Equilibrium Price | Where the quantity demanded is equal to quantity =supplied, so there is neither excess demand nor supply |
| Consumer Surplus | The difference between how much consumers are willing and able at the most to pay for some amount of a good, and what they actually end up paying (ON DIAGRAM: D curve can be read horizontally) |
| Producer Surplus | The difference between what firms earn from selling some amount of a good and the minimum they would require to be willing to offer this amount (ON DIAGRAM: S Curve can be read vertically) |
| Social/ Community Surplus | The sum of the consumer surplus and the producer surplus (used to measure welfare) |
| Condition for Allocative Efficiency | The price (or marginal benefit) must equal to the marginal cost for the last unit supplied |
| The Law of Demand | The inverse relationship between price and quantity demanded (meaning that if the price increases, the quantity demanded will decrease as consumers will be willing and able to buy less per period) |
| Complement Goods | Two goods that are often consumed together (e.g. DVD and DVD Player) |
| Substitutes | Two goods that are in competitive consumption and consumers typically buy one or the other as the goods satisfy the same needs and wants (e.g. Pepsi VS Coca-Cola) |
| Demand Changes | When any determinant other than the price of the good changes |
| Quantity Demanded Change | When the price of the good changes and results in a movement along the demand curve |
| Drawing a Demand Curve |
Image:
demand-curve (image/png)
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| Ceteris Paribus | All other factors are assumed constant |
| Law of Supply | If the price of a product increases then quanitity supplied per period is expected to increase |
| Supply Changes | Any determinants other than the price of the good changes |
| Quantity Supplied | When the price of the good changes and results in a movement along the supply curve |
| Community Surplus |
Image:
Economic-welfare (image/png)
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| Allocative Effiency | It has been achieved when the scarce resources have been allocated in the best possible way to optimize both producer and consumer surplus (so that they are equal) |
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