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ECON 2022 EXAM #1
Terms in this set (35)
Eat'za Pizza restaurant had to increase the price of its pizza due to increased costs of tomato sauce and discovered that the number of pizzas sold slightly increased
demand for pizza shifted out after a study found that tomato sauce prevents prostate cancer
describes demand that is not very sensitive to price changes
describes demand that is very sensitive to a change in price
The amount of goods available
Consumer willingness and ability to buy products
If milk and cookies are complements in consumption
milk and cream are complements in production....
equilibrium quantity of milk will definitely decrease
The price of cookies RISES and the price of cream RISES
Because of decreasing marginal benefit, the consumer surplus for the first unit of a good is ____________ the consumer surplus from the second unit
Extra cost of producing one additional unit of good
the extra benefit of adding one unit
Consumer Surplus (CS)
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
A situation in which unlimited wants exceed the limited resources available to fulfill those wants
Scarcity in economics means:
not having sufficient resources to produce all the goods and services we want
Suppose apartments rent for $1,600 in Denver. If the city of Denver forces each landlord to charge $1,200, there will be:
an increase in consumer surplus for Bostonians who can find apartments for $1,200
Producer Surplus (PS)
the amount a seller is paid for a good minus the seller's cost
A situation in which quantity supplied is greater than quantity demanded
Suppose that hot dogs and hamburgers are substitutes (in consumption), hot dogs and beans are complements and hot dogs are an inferior good. The demand for hotdogs will shift in or down...
when the price of hamburgers decreases
a good that consumers demand less of when their incomes increase
Goods that can be used as alternatives to another good
preferred product according to standards of consumption and living; the amount spent increases as income increases and decreases when income decreases but at a faster rate than the income increases or decreases; economic luxury
Law of Demand
consumers buy more of a good when its price decreases and less when its price increases
A binding price ceiling is designed to:
keep prices low
A rightward shift in the supply of U.S. cars is most likely to be due to...
the introduction of cost-saving robots on the production line
If unemployment rate increases from 5% to 7%, the...
economy will move farther away from the production possibility frontier
production possibilities frontier
a line on a production possibilities curve that shows the maximum possible output an economy can produce
income elasticity of demand
a measure of the responsiveness of the quantity demanded to changes in income, measured by the percentage change: quantity demanded / by the percentage change in income
If the income elasticity of demand for salmon is 1.2, then if you get 10% raise,
the quantity demanded of salmon will increase by 12%
perfectly elastic demand curve
a horizontal line reflecting a situation in which any price increase reduces quantity demanded to zero; the elasticity has an absolute value of infinity
perfectly inelastic demand curve
a vertical line reflecting a situation in which any price change has no effect on the quantity demanded; the elasticity value equals zero
As Mary's income increases by 20 percent, her demand for tickets to National Hockey League games increases by 30 percent. Mary's demand for tickets is income ________; for Mary, hockey
tickets are ________ good.
Mary's demand for tickets is income elastic; for Mary, hockey tickets are a normal good.
A small private college increases tuition while a large public university in the same state does not. What will happen to the demand (enrollment) for both schools?
Assuming that the private and public universities are substitutes. Enrollment at the private should decrease while enrollment at the public university should increase.
*Public universities will see a shift in the demand curve
A price ceiling has been imposed at point d. Identify the areas that correspond to the consumer surplus, producer surplus, and deadweight loss with this price control. In addition, identify the area that represents lost producer surplus that has been transferred to consumers as a result of this policy.
lost PS transferred to consumers: d,c,k,h
In August 2005, Hurricane Katrina damaged or destroyed oil platforms in the Gulf of Mexico, refineries along the Gulf coast, and the pipeline infrastructure that transports oil to customers across the eastern United States. The Winter of 2005 was also unusually cold in many parts of the country. How did these events affect the market for heating oil?
The market for oil
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