Supply & Demand
These 4 factors shift SUPPLY
Change in Input Prices, Technology, Number of Producers, Producer Expectations ab Future Prices
How would you characterize the slope of an inelastic demand or supply curve? (think how the curve looks)
Steep
This exists when quantity demanded exceeds quantity supplied
Shortage
If Kentucky can produce 60 trucks/hour and Ohio can produce 100 trucks/hour, which state has absolute advantage?
Ohio
Minimum wage would be an example of a price _____
Floor
These 5 factors shift DEMAND
Income, Change in price of related goods, Tastes, Population, Consumer Expectations ab Future Prices
What type of elasticity of demand does a Lamborghini have? What type of good is it?
High elasticity, luxury good
If a market has Dead Weight Loss, it is always this
Inefficient
Whoever has the LOWER opportunity cost has this (and will specialize in that good)
Comparative Advantage
A tax is _________ when the percentage of the tax rate decreases with income
Regressive
These are goods that can take the place of each other
Substitutes
What is the elasticity equation?
E= (Q2-Q1/Q1) / (P2-P1/P1)
When you're shifting both supply and demand curves at the same time, either price or quantity is going to be this
ambiguous
On the production possibilities graph, where would you put a point where trade happens?
Outside of the original curve
Would a Price Ceiling be above or below the equilibrium?
Below
These are goods that are consumed together
Complements
If elasticity is greater than 1, the demand is _______
Elastic
TRUE or FALSE: If producer surplus is less than consumer surplus and deadweight loss= 0, the market is inefficient
False -- the market may not be equitable but it is still efficient
TRUE or FALSE: Trade can usually make everyone better off.
True
Do consumers pay more of the tax if the demand is elastic or inelastic?
Consumers pay more of the tax when the demand curve is inelastic. Producers pay more when demand curve is elastic.
If wooden pencils are an inferior good while mechanical pencils are a normal good, what will happen in each market if Income increases?
Wooden pencils: Demand will shift in (to the left), price and quantity will decrease
Mechanical pencils: Demand will shift out (to the right), price and quantity will increase
If Quantity falls by 5% and Price rises by 25%, how much is the Price Elasticity of Demand of this product? Is it elastic or inelastic?
P Elasticity of Demand = 0.2, Inelastic
What does the invisible hand represent?
The pressure put on markets to find the market equilibrium
If Emma can solve 3 math problems OR 2 physics problems in 5 min, what is her OC for solving math problems?
2/3 physics problems
What is a Negative Externality?
A cost or negative spillover resulting from a decision not made by the people experiencing the externality