Exam 1 Study Guide
Exam 1 Study Guide Econ 2020
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This 3 page Study Guide was uploaded by Cheyenne Hunt on Saturday January 30, 2016. The Study Guide belongs to Econ 2020 at Auburn University taught by William M. Finck in Spring 2016. Since its upload, it has received 54 views. For similar materials see Principles of Economics: Microeconomics in Business at Auburn University.
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Date Created: 01/30/16
Exam 1 Study Guide Vocabulary: Cost- the sacrifice associated with making a choice; in a standard market transaction, it is paid by the producer Demand curve- a line that shows the maximum that consumers are willing to pay for any quantity Demand schedule- a table that shoes how much of a good or service consumers will want to buy at various prices Demand- the relationship between price and quantity demanded for all possible prices Economics- the social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity Equilibrium price- price at which quantity supplied equals quantity demanded Explicit costs- out-of-pocket, monetary payments Free good- opposite of scarce good; good for which you can get all you want at zero cost nd Implicit costs- opportunity costs; most valued option forgone; 2 best choice Law of demand- the price of a good and the quantity demanded are inversely related Law of supply- the price of a good and the quantity supplied are directly related Marginal- additional; the change that results from an additional unit Market- any institution that brings together buyers and sellers of a particular good or service Model- a simplified representation of how something works Price ceiling- a maximum legal price Price controls- legal restrictions on prices Price floor- a minimum legal price Price rationing- the allocation of goods among consumers using prices Price- signal that tells producers what and how much to produce; in a standard market transaction, it is paid by the consumer Quantity demanded- the number of units consumers are willing to buy at a specific price Quantity supplied- the number of units producers are willing to supply at a specific price Resources- the inputs used in the production of goods and services; factors of production o Capital resources- all manufactured goods used in production o Labor resources- physical and mental talents used in production o Natural resources- land, oil, lumber, etc. Scarce good- economic good; good for which you cannot get all you want at zero cost Scarcity- the condition whereby the resources we use to produce goods and services are limited relative to our wants for them Shortage- at price below equilibrium, when quantity demanded is greater that quantity supplied Supply curve- a line that shows the maximum that producers are willing to supply for any price Supply schedule- a table that shows how much of a good or service producers will want to supply at various prices Supply- the relationship between price and quantity supplied for all possible prices Surplus-at price above equilibrium, when quantity supplied is greater than quantity demanded Utility- the satisfaction a consumer obtains from the consumption of a good or service Concepts: Change in Qd/Qs v. change in demand/supply o A change in quantity demanded or quantity supplied is caused by a change in the price, a movement along the curve o A change in demand or supply is caused by a shift of the curve Circular Flow Consequences of price controls o Shortage or surplus o Inefficient allocation of and wasted resources among consumers or producers o Low quality of goods or services and protection from imports Factors that shift the demand curve o Income- direct relationship for normal goods, inverse relationship for inferior goods o Expectations of Future Prices- direct relationship o Number of Buyers- direct relationship o Tastes and Preferences- direct relationship o Complimentary/Substitute Goods- inverse for complements, direct for substitutes Factors that shift the supply curve o Input/ Resource Prices- inverse relationship o Technology- direct relationship o Taxes- inverse relationship o Expectations of Future Prices- inverse relationship o Number of Sellers- direct relationship Implicit Costs o What is given up to obtain the market good or service Price v. Cost o Price is paid by consumers, and cost is paid by producers
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