ECON 201 Final Exam 2022
impact on quantity demanded of an elastic good when price changes slightly - quantity demanded changes even more than price because of the availability of substitutes (ex: wheat, coke/pepsi)
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ECON 201 Final Exam 2022
impact on quantity demanded of an elastic good when price changes slightly - quantity demanded changes even more than price because of the availability of substitutes (ex: wheat, coke/pepsi)
quantity demanded changes less than price because consumers need the product (ex: gas) - impact on quantity demanded of an inelastic good when price changes slightly
potential for profit has what impact on competition? - creates more competition by drawing new firms toward the industry
losses impact competition in what way? - creates less competition as firms leave the industry in pursuit of more profitable enterprises
potential for profit attracts new firms to the industry and thus... - supply increases, driving price down and thus reducing profitability
losses chase firms out of the industry and thus... - supply decreases, causing prices to rise and losses to disappear
what is the impact of the "invisible hand" - pushes resources towards their most profitable use
when profit is present in an industry, the invisible hand... - causes new businesses to enter that industry, causing price to fall, and the profitability to decrease
when losses are present in an industry, the invisible hand... - causes businesses to leave for more profitable industries, leading to a rise in price as a result of decreased supply, making businesses that remain more profitable
the zero profit theorem suggests that when the cycle of resources from one industry to another ceases... - equilibrium is reached
every transaction must have... - a buyer and a seller voluntarily participating in the transaction
mutual benefit is when... - consumers pay less than they would have been willing, sellers charge more than they had to spend on production
consumer surplus - when a consumer pays less for a product than they would have been willing to. marginal benefit>price
producer surplus - when a seller is able to charge more for their product than they had to spend on production. market price>cost of production
when both consumer surplus and consumer surplus are present in a market, that market is said to be... - efficient
total welfare - when marginal benefit for society exceeds marginal cost for society
deadweight loss - when total welfare is below maximum. meaning the market could do better if the invisible hand pushed resources to more profitable areas. this is the result of underproduction or overproduction.
deadweight loss is a measure of... - inefficiency
supply - the relationship between the price of the good and the quantity supplied
individual supply - follows marginal cost for each optimizing firm to maximize that firm's profit
market supply - horizontal sum of individual supply for all firms at every price
supply shock - a shift of the whole supply curve from one place on the plain to another. causes the quantity produced to change at every price. marginal cost for seller changes
changes in quantity supplied cause supply to move - to a new point on the same curve
changes in supply cause supply to move - to a new place on the price/quantity plain
increase in supply moves supply curve ________ on the plain, decrease in supply moves the supply curve _______ on the plain - right, left
changes in quantity demanded are the result of ... - a change in price of the good
changes in supply are the result of... - a change in something other than the price
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