ONE PAGE NOTES for EXAM 1 -ISAKSON
ONE PAGE NOTES for EXAM 1 -ISAKSON ECON 1051
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This 2 page Study Guide was uploaded by Caitlyn Millard on Wednesday September 23, 2015. The Study Guide belongs to ECON 1051 at University of Northern Iowa taught by Dr. Hans Isakson in Fall 2015. Since its upload, it has received 361 views. For similar materials see Principles of Microeconomics in Economcs at University of Northern Iowa.
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Date Created: 09/23/15
The Law of Supply explains the positive relationship between price and quantity supplied A decrease in price will increase quantity demanded A shift in the demand curve can be cause by a change in one of the determinants of demand EX of LAW of DEMAND Sue wants to buy more candy bars at 2 than at 1 A shift in the supply curve can be cause by a change in one of the determinants of supply If the price of a Kayak increases Sellers offer more kayaks for sale The demand curve is a graphical representation of the relationship between price and quantity demanded Milk and cereal are an example of complementary goods Which definition below best describes this relationship goods related in such a way that an increase in price of one leads to a decrease in the demand for the other You are the brand manager of FritoLay39s Cheese Puffs account and notice that when the price of Cheetos increases there is an increase in demand for Cheese Puffs What is the economic relationship between these goods that explains this behavior The increase in the price of Cheetos caused an increase in demand for Cheese Puffs therefore these goods are substitutes You and other college students are deciding whether to major in music or engineering You learn that there is a shortage of engineers making it easy for engineering graduates to find employment while there is a glut of musicians for whom finding a job is difficult As a result you and many other college students decide to major in engineering What economic principle does this illustrate Markets tend to move towards equilibrium as individuals respond to incentives If the price of hockey pucks goes up from 799 to 1499 what can we expect from suppliers of hockey pucks as a result There will be an increase in quantity supplied What does the price of diesel fuel in Russell KS have to do with the price of bread in Boulder CO Since farmers in KS use diesel fuelpowered equipment to plant harvest and transport grain an increase in the price of fuel may increase the price of bread When asked to write the definition of the quotLaw of Demandquot on an exam Chris wrote quotWhen the price of a good increases consumers will decrease the amount that they purchase quot Chris39 professor deducted one point for this response The professor most likely deducted one point because Chris forgot to include the phrase quotholding everything else constant How do markets respond to allocate goods and services when quantity demanded exceeds quantity suppHed Price Rise Which of the following would lead to the market allocating goods or services by the process above The supply curve shifts left Which of the following best represents an example of perfectly inelastic elasticity of zero supply Original paintings made by Leonardo Da Vinci Determine which statement about the absolute value of the price elasticity of demand is correct The price elasticity of demand for Gain laundry detergent is likely to be greater than the price elasticity of demand for laundry detergent in general Farmer Mauricio raises goats When he can sell his goats for 200 he will sell any or all of his goats He never asks more than 200 per goat and he never sells his goats for less than 200 This is an example of perfectly elastic supply Which of the following is not a reason why negative consequences can result from efforts to control prices Prices reflect the amount of profit that producers want to gain for providing goods services labor or financial capital to the market Select the term that best fits the scenario Garret is an undergraduate looking for a job to pay for college As Garret seeks employment he is glad to know that he will be paid at least 725 per hour Price Floor Select the term that best fits the scenario Steve decides not to rent out his second home since his is not allowed to set the rate above 1000 per month even though he knows he could find renters willing to pay much more Price Ceiling Suppose that the government imposes a commodity tax on alcohol Assuming that both alcohol demand and supply are relatively elastic what happens to alcohol consumption and to the alcohol market price Alcohol consumption decreases while the alcohol market price increases if the tax is placed on sellers or decreases if the tax is placed on buyers Price ceiling a legal maximum on the price of a good or service Example rent control Price floor a legal minimum on the price of a good or service Example minimum wage The creation of an artificial shortage the more elastic the market the greater the shortage WW Nonprice rationing eg long lines at gas stations The generation of a black market eg gasoline in the old Soviet Union The ceiling will always hurt some of the people it is intended to help esp those who could buy gas before the ceiling but now cannot buy any Consequences of a Binding Price Floor It produces an artificial surplus of the good the greater the elasticity of the market the greater the surplus It results in nonprice rationing who gets the high paying minimum wage jobs It generates a black market for the good what is a black market in textiles called It hurts some of the people it is intended to help eg some people who had a job before the increase in the minimum wage are laidoff A tax on a good places a wedge between the price buyers pay and the price sellers receive and causes the eq m quantity to fall whether the tax is imposed on buyers or sellers The incidence of a tax is the division of the burden of the tax between buyers and sellers and does not depend on whether the tax is imposed on buyers or sellers The incidence of the tax depends on the price elasticities of supply and demand The greater burden of a tax falls on the less elastic side of the market Quantity Supplied of any good is the amount that sellers are willing and able to sell at a given price Supply of any good a combination of many pairs of price and the corresponding quantity supplied Law of Supply the claim that the quantity supplied of a good rises when the price of the good rises other things equal Quantity Demanded of any good is the amount of the good that buyers are willing and able to purchase at a given price Demand for a good is the combination of many pairs of price and the corresponding quantity demanded Law of Demand the claim that the quantity demanded of a good fails when the price of the good rises other things equal Market is group of buyers and sellers of a particular product Competitive Market is one with many buyers and sellers each has a negligible effect on price Perfectly Competitive Market All goods are exactly the same Buyers and sellers so numerous that no one can affect market price each is a price taker
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