Karteikarten
Micro econ UNI
Karten in diesem Stapel (55)
- 1Price Elasticity of demandresponsiveness of quantity demanded to a change in price
- 2Price elasticity of demand formulaPercentage change in Q demanded/percentage change in price
- 3If quantity demanded remains constant as price changesPrice elasticity of 0
Perfectly inelastic demand - 4If percentage change in price equals change in Q demandedElasticity=1
Unit elastic demand - 5If the percentage change in Q demanded< percentage change in priceprice elasticity of between 0 and 1
Inelastic demand - 6If the percentage change in Q demanded is greater than percentage change in priceElasticity of demand greater than 1
Elastic demand - 7If the quantity demanded changes by an infinetly large percentage from a tiny percentage change in pricePerfectly elastic demand
- 8Factors that affect Price elasticity of demandCloseness of subsitutes
Proportion of income spent on the good
Time elapsed since a price change - 9Factors that affect Price elasticity of demand: Closeness of subsitutescloser the subsitute for a good, the more elastic the demand
necessity are needed and have little subsitutues,so generally inelastic
Luxurys are wants and have many substitutes,so generally elastic - 10Factors that affect Price elasticity of demand:Proportion of income spent on goodThe greater the proportion of income psent on a good, the more elastic the good is
For example if the price of salt doubles,still price inelastic because it's a tiny proportion of income - 11Factors that affect Price elasticity of demand:Time elapsed since price changeThe longer the time that has elapsed since a price change,the more elastic is demand
- 12Elasticity of supplyMeasures the responsiveness of the Q supplied to a change in price of a good
- 13Elasticity of Supply formulaElasticity of Supply= Percentage change in Q supplied/ Percentgae change in price
- 14Perfectly inelastic supplyif Q supplied remains costant when the price changes
- 15Unit elastic supplyIf the percentage change in Q supplied = percentage change in price
Elasticity =1 - 16When percentage change in Q supplied is less than the percentage change in priceElasitcity of supply between 0 and 1
Inelastic supply - 17If Q supplied changes by an infinte amount due to a tiny price changeElasticity of supply is infinity
Perfectly elastic supply - 18If the percentgae chnage in Q supplied exceeds percentgae change in priceElastic supply
Elasticity greater than 1 - 19Factors that influence Elasticity of SupplyResource substitution possibilities
Time frame for supply decision - 20Factors that influence Elasticity of Supply: Resource substitution possibilitiesSome goods can be produced using unique or very rare resources, so have inelastic/ no elasticity of supply
Some items can be produced with common resources that could be allocated to a wide variety of goods or services.Have a high elasticity of supply - 21Factors that influence Elasticity of Supply: Time frame for the supply decision; 3 types of time framesMomentary supply
Short-run supply
Long-run supply - 22Factors that influence Elasticity of Supply: Time frame for the supply decision; Momentary supplyMomentary supply curve shows response of Q supplied immeidately following a price change
Vertical supply curve
Fruit and veg are perfectly inleastic. no matter what the price is,producers cannot change their output.Q available for that day is fixed - 23Factors that influence Elasticity of Supply: Time frame for the supply decision; Short-run supplyShort-run supply curve shows how Q supplied responds to a price change when only some of the technologically possible adjustments to productio have been made
Curve slopes upward because producers can quickly producers can take actions quickly to change Q supplied in response to a price change - 24Factors that influence Elasticity of Supply: Time frame for the supply decision; LONG RUN SUPPLY CURVEResponse of Q supplied after all the technologically possible ways of adjusting supply have been used.
For example Oranges- long run is time it takes new plantings to grow to full maturity, 15 yearsgku - 25Resource allocation methodsMarket price
Command
Majority rule
Contest
First come first served
Lottery
Personal characteristics
Force - 26Resource allocation methods: Market priceWhen a market price allocates scare resources,those who are willing and able to buy the good get the resource.
2 types of people decide not to pay the market price:
- those who are able but not willing
-Those who are not able and not willing - 27Resource allocation methods: CommandA command system allocates resources by those in authority.Examples are inside firms, and Government departments
- 28Resource allocation methods: First come first servedAllocates resources to those first in line.
For example tables in a restraunt, or scarce space on a motorway - 29Marginal benefitThe value we get from one more unit of a good or service
- 30How to measure marginal benefitMaximum price that is willingly paid for another unit of a good or service
Willingness to pay determines demand
A demand curve is a marginal benefit curve - 31Individual demandRelationship between price of a good and qauntity demanded by one person
- 32Market demandRelationship between price of a good and the quantity demanded by all buyers is called market demand.
- 33Consumer surplusWhen people buy something for less than they would be willing to pay
Excess of benefit recieved from a good over the amount paid for it - 34Consumer surplus formulaWork out the Area of the triangle:
Marginal benefit- price* Quantity bought/ 2 - 35CostWhat a producer gives up
- 36PriceWhat a consumer recieves
- 37Marginal costCost of producing one more unit of a good or service
Minimum price producers must recieve to convince them to sell another unit of a good or service - 38A supply curve=Marginal cost curve
- 39Market supply curveHorizontal sum of all the individual supply curves and is formed by adding all the quanitties supplied by all the producers at each price
- 40Marginal social costSociety's marginal cost
- 41Producer surplusfirm recieves this When price exceeds marginal cost
excess of the amount of a sale of a good or service over the cost of producing it - 42Producer surplus formulaPrice recieved for a good- minus marginal cost* Quantity sold
Area of triangle= height*width/2 - 43EquilibriumWhen Q demanded equals the Q supplied
Marginal social benefit on the demand curve= marginal social cost on the supply curve - 44Total surplusSum of consumer and producer surplus
Total surplus is maximised when the efficient quantity is produced - 45Market failureWhen there is an inefficient allocation of resources
- 46Reasons for market failure- Too little is produced
-Too much is produced - 47Reasons for market failure: UnderproductionThe total surplus is smaller than the maximum possible.quantity produced is inefficient.
- 48Deadweight lossDecrease in total surplus that results from an inefficient level of production
- 49OverproductionWhen the price consumers are willing to pay is less than the amount it costs to produce
- 50Sources of market failurePrice and Quantity regulations
Taxes and subsidies
Externalities
Monopoly
Public goods - 51Sources of market failure: price and Q regulationsfor example quantity regulations that limit how much a farmer can produce can lead to underproduction
- 52Sources of market failure: Taxes and subsidiesTaxes increase the prices paid by buyers and lowers the prices recieved by sellers.
Taxes decrease Q produced and lead to underproduction
Subsidies,which are payments from Governments to producers, decrease the prices paid to buyers and increase the prices recieved by sellers,
Subsidies increase Q produced and lead to overproduction - 53Sources of market failure: ExternalitiesExternality is a cost or beneift that affects anyone other than the buyer or seller
An eletric power utility creates a external cost by burning coal that brings acid rain.utlity doesnt consdier cost of production when it decides how much power to use,so there is overproduction - 54Sources of market failure:MonopolyMonopoly= A firm that is a sole provider of a good or service
self-intrest of a monopoly is to make profit
Monopoly has no competitors, so it can set a price to achieve it's goal. Therefore a monopoloy produces too little and sets too high a price so there is overproduction. - 55—
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- Karteikarten am Micro econ UNI, erstellt von James Dunn am 17/12/2018.
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- James Dunn
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