Define
What law states that demand is negaively correlated with price?
law of demand
Economic actors who are responsible for supplying goods and services in the economy are called what?
firms
What is this point called?
equilibrium
Which of these is not a basic assumption of economics?
a. scaarcity
b. expectations
c. opportunity cost
d. rationality
b. expectations
Specialization allows for what?
What is a good in which a decline in the price of it causes a reduction in the quantity demanded of another?
substitute
What is the reuction in social welfare caused by tax called?
deadweight loss
Do producers or consumers benefit in this scenario?
producers
If at each price, a lower quantity is demanded, what direction does the demand curve shift?
left
How much economic profit do competitive market business owners earn?
zero
What are the actual monetary expenditures of firms called?
accounting costs
What is a good where demand is negatively related to income?
inferior goods
What is the shaded area a measure of?
total surplus (producer + consumer)
Even if A has an absolute advantage over B, why can they still benefit from trade?
B has a comparative advantage in one area
How does elasticity affect revenue?
Elastic demand → increase in total revenue b/c proportionate ΔQ will be greater than proportionate ΔP
The measure of how much quantity supplied responds to change in price is called what?
price elasticity of supply
What is it called when marginal costs increase as more output is produced?
diminishing returns to scale
What type of elasticity is this?
inelastic demand (elasticity < 1)
If a 1% change in price causes a 3.5% change in demand, what type of elasticity is it?
elastic
What causes producers to enter the market?
economic profit > 0
What is the increase in costs that occurs when producing an additional unit of output called?
marginal cost of production
What are the characteristics of a perfectly competitive market? (3)
good/service standardized, large number of buyers and sellers, all participants well informed about market price
What does the shaded area represent?
total revenue
Why is there opposition to trade even though it increases overall well being?
specialization causes shifts in economy – some citizens will experience losses
What is the impact of elasticity on taxes? (who pays it and effect on equilibrium)
Less elastic demand → greater share of tax paid by buyers
Less elastic → smaller effect of tax on equilibrium quantity, smaller deadweight loss