1. Economics Flashcards #41-80 Unit 2 Microeconomics

2. 41. Microeconomics
Studies the interaction of people and businesses (or firms) within a single market.
Managers make decisions about how much to produce, how to price the product, and how much workers should be paid.

3. 42. Circular Flow Diagram
Illustration showing how households and businesses use markets to exchange money, products, and resources.

4. 43. Factor Market
Market in which firms purchase the factors of production from households.
Inputs such as land, labor, capital
Example for lemonade stand:
Lemons, sugar, water (land)
Person operating stand (labor)
Knives and stirring spoon (capital)

5. 44. Product Market
The market in which households purchase the goods and services that firms produce.
Outputs, such as goods and services.
Example for lemonade stand:
Glass of cold lemonade (good)

6. 45. Law of Demand Price and demand have an inverse relationship.
As price goes up, demand goes down and as price goes down, demand goes up.

7. 46. Demand Curve
Graphical representation of a demand schedule.

8. 47. Change in Quantity Demand
Movement along a single demand curve by a change in price.

9. 48. Change in Demand Shows a shift in the demand curve.
Represented by 2 curves.
(Assuming prices do not change)

10. 49. Demand Shifters Number of consumers Price of other goods
Substitutes goods
Complimentary goods
Income change
Consumer tastes and preferences
Expectations for the future

11. 50. Complimentary Goods
Goods that go together. Change in the demand for one has the same effect on the other. (PB and J)

12. 51. Substitute Goods
Goods that can be used in place of the other. Change in demand for one has the opposite effect on the other.

13. 52. Law of Supply Price and supply have a direct relationship.
Price goes up, supply goes up, and as price goes down, supply goes down.

14. 53. Supply Curve
A graphical representation of a supply schedule.

15. 54. Change in Quantity Supplied
Movement on a single supply curve because of a change in price.

16. 55. Change in Supply Shows a shift in the supply curve.
Represented by 2 curves.
(Assuming price does not change)

17. 56. Supply Shifters Number of producers Cost of inputs/resources
Technological improvements
Expectations for the future (profit motive)
Government regulations
Education

18. 57. Equilibrium Price
Point where quantity supplied and quantity demanded are the same.
Also called Market Clearing Price.

19. 58. Price Controls
The government sometimes views the equilibrium price as too high or low so they have either price floors or price ceilings as a result.

20. 59. Price Floor
The government sets a minimum price for how much a product can be sold for. Typically the price is higher than equilibrium and causes a surplus. (Ex. Minimum wage, Agriculture Products)

21. 60. Surplus
Excess Supply.
Supply exceeds demand.

22. 61. Price Ceiling
The government sets a maximum price at which a good can be sold. Typically this price is lower than equilibrium and causes a shortage (Ex. NYC rent control)

23. 62. Shortage
Excess demand.
Demand exceeds supply.

24. 63. Elasticity
How much supply or demand reacts to a change in price.

25. 64. Inelastic Demand or Supply
Demand or supply has little change when price changes.

26. 65. Elastic Demand or Supply
Demand or supply has a lot of change when price changes.

27. 66. Business Organizations
There are 3 types of business organizations:
Sole Proprietorship
Partnerships
Corporations

28. 67. Sole Proprietorship
Business owned by only 1 person.

29. 68. Partnerships
Business owned by 2 or more people.

30. 69. Corporations
Business owned by shareholders (stockholders).

31. 70. Market Structures There are 4 basic market structures: - monopoly
- pure (perfect) competition
- monopolistic competition
- oligopoly

32. 71. Pure (perfect) Competition
Market structure where there are many buyers and sellers selling identical products. (ex. - farm products)

33. 72. Monopolistic (Imperfect) Competiton
Market structure where there are many buyers and sellers selling similar products that can be differentiated by brand. (ex. - soaps, blue jeans, tennis shoes)

34. 73. Oligopoly
Market structure where a few businesses dominate the market. (Ex. - Direct and Dish/ AT&T and Verizon)

35. 74. Monopoly
Market structure dominated by a single business. (Ex. – Standard Oil, Demorest water)

36. 75. Natural Monopolies
When the market runs more efficiently by having one business control the market (ex. - public utilities)

37. 76. Barrier to Entry
How difficult it is to get into a market.

38. 77. Government Involvement
The government gets involved in the economy by doing these things:
Produce public goods and services
Redistribute income
Protect property rights
Resolve market failures

39. 78. Market Failures
Occur when the private market is unable to produce goods and services with a marginal benefit that is equal to or greater than the marginal cost to society.
Obesity epidemic as a market failure

40. 79. Externalities
A type of market failure that occurs when a third party is hurt (or benefits) from the use of the good.
In this example, the bicycle rider is the 3rd party who is hurt by the auto industry.

41. 80. Deregulation
The reduction or elimination of government power in an industry.
May help to increase competition, which could improve business profits and reduce costs for consumers.