Unit 1: Foundations of Microeconomics
The four factors of production are...?
Land, Labor, Capital, Entrepreneurship (Enterprise)
What is the law of supply?
When price goes up, quantity supplied goes up. When price goes down, the quantity supplied goes down.
What is the law of demand?
The market eqilibrium condition is
Quantity supplied = Quantity demand
Two examples of a price control
Price floor (price minimum); price ceiling (price maximum)
Labor can be defined as?
The human factor needed for production. it includes the physical and mental effort that people contribute to the production of goods and services
What is supply?
The quantity of a good/service that producers are willing and able to sell.
The quantity of a good/service that consumers are willing and able to pay.
What is a substitute?
Two goods that can replace each other
What are two other names for a per-unit tax?
An example of a service is ?
The definition of a surplus is?
When the quantity supplied is greater than the quantity demanded.
The definition of a shortage is?
When the quantity demanded is greater than the quantity supplied.
What is a complement?
Two goods that are typically consumed together.
A sum of money granted by the government to assist an industry, business, or other institution, usually to achieve some public goal.
What is opportunity cost?
The value of a foregone alternative; the value of the next best alternative
What are three non-price determinants of supply?
What are three non-price determinants of demand?
The number of consumers; seasons; increase in income taxes
The price where quantity demanded = quantity supplied.
A price floor is effective when...?
A price floor is set above equilibrium price
What is the definition of Economics?
A shift to the right of supply curve.
A decrease in price causes...
A shift along the demand curve to the right
What happens to the equilibrium point (price and quantity) if there is a shift out in the supply curve?
Equilibrium quantity supplied increases; equilibrium price decreases.
What is deadweight loss?
The loss of economic efficiency when the market produces or consumes an inefficient quantity of a good or service, meaning some mutually beneficial trades don't happen. This creates a societal cost that benefits neither consumers, producers, nor the government.