A1 The quantity of a good or service varies “inversely” with its price. Law of Demand
A2 The amount of usefulness or satisfaction that someone gets from the use of a product. Utility
A3 Diminishing Marginal Utility? Decreasing satisfaction or usefulness as additional units of a product are acquired.
A4 ILLUSTRATE & EXPLAIN Income Effect & Decrease in Price Change in the Quantity Demanded P Q P1 P2 Q1Q2 As price decreases, the consumer has more “real income”, thus they can demand more of a product.
A5 ILLUSTRATE & EXPLAIN Substitution Effect & Increase in Price Change in the Quantity Demanded P Q P2 P1 Q2Q1 As price increases, the price in comparison to a “substitute” is higher, thus a consumer will demand less of this product
A6 Two goods are considered this if both are used together for consumption or enjoyment. Complements Change in Demand
A7 ILLUSTRATE & EXPLAIN The price of a “substitute” increases Change in Demand P Q As the price of a “substitute” increases, consumer demand for this product increases. The Demand Curve shifts to the RIGHT.
A8 Voluntary association of people/firms formed to carry on some kind of economic activity that will benefit its members. Cooperative
A9 What powers does a General Partner have that a Limited Partner does NOT? Responsible for the management of the business.
A10 If a product’s purchase can NOT be delayed, what type of Elasticity does it have? Explain? Inelastic – Product is “urgent” so a change in price won’t affect the Quantity Demanded.
B1 For Suppliers, what must be considered when setting Price of a product? Costs involved in production.
B2 ILLUSTRATE & EXPLAIN Change in Quantity Supplied Change in the Quantity Supplied P Q P2 P1 Q2Q1 There will be movement along the curve due to a change in price.
B3 Concerning Supply Elasticity, what is the largest determinant of elasticity? Production Concerns.
B4 Sum of fixed and variable costs. Total Costs
B5 ILLUSTRATE & EXPLAIN Worker Productivity is Increased. Change in Supply P Q Productivity will help reduce costs, which will increase production.
B6 The extra cost incurred when a business produces one additional unit of a product. Marginal Cost
B7 The total output or total product the business needs to sell in order to cover its total costs. Break Even Point
B8 If reinvestment is taking too long, how else can a company maintain growth? Merger
B9 ILLUSTRATE & EXPLAIN Increase in Government Regulations Change in Supply P Q More regulations will cause costs to increase, which will cause a decrease in production.
B10 The Law of Supply states: Suppliers will offer more for sale at high prices and less at lower prices.
C1 How does a Command Economy allocate scarce resources? The government will set prices and amounts of usage for the economy.
C2 A situation in which prices are relatively stable, and the quantity of goods and services supplied is equal to the quantity demanded. Market Equilibrium
C3 ILLUSTRATE & EXPLAIN Surplus Market Equilibrium P Q S1 D1 EP Q1 P1
C4 ILLUSTRATE & EXPLAIN Increase in Supply Predicting Prices P Q S1 D1 EP1 Q1 Supply will shift to the RIGHT, and EP will decrease. S2 EP2 Q2
C5 ILLUSTRATE & EXPLAIN Decrease in Demand Predicting Prices P S1 D1 EP1 Q1 Demand will shift to the LEFT, and EP will decrease. Q2 EP2 D2
C6 What advantage does Diversification create for a company or investor? By spreading out investments, the risks of heavy losses are minimized.
C7 ILLUSTRATE & EXPLAIN Inelastic Demand & Decrease in Supply Predicting Prices P S1 D1 EP1 Q1 Supply will shift to the LEFT, and there will be a larger increase in EP Q2 S2 EP2
C8 Tax Table of Single Individuals (2002) What is a good argument FOR the use of the Minimum Wage? EQUITY This will raise poor people’s incomes.
C9 ILLUSTRATE & EXPLAIN Price Ceiling Distorting Market Outcomes P Q S1 D1 EP Q1 P1
C10 How could a Supplier react to a Price Ceiling? Convert resources to a more profitable market. Cut costs to maintain both revenue and profit.
D1 Involves human resources that perform the functions of organizing, managing, and assembling the other factors of production to make business ventures. Entrepreneur
D2 The money used to buy the tools and equipment used in production. Financial Capital
D3 A rise in the general level of prices. INFLATION
D4 The cost of the next best alternative use of money, time, or resources when one choice is made rather than another. Opportunity Cost
D5 Measure of the amount of output produced by a given amount of inputs in a specific period of time. Productivity
D6 Federal program of disability and retirement benefits that covers most working people. Social Security
D7 This takes place when factors of production perform tasks relatively more efficiently. Specialization
D8 Economic system in which a central authority makes most of the economic decisions. Command Economy
D9 Agency designed to regulate the stock and bond markets in the United States. Securities Exchange Commission (SEC)
D10 Agency designed to protect consumers from false or misleading advertising. Federal Trade Commission (FTC)
E1 A relatively high tax designed to raise revenue and reduce consumption of a socially undesirable product. Sin Tax
E2 Concerning the Impact of Taxation, what affect does an Increase in Taxes have on Demand? The increase in taxes causes a decrease in Demand due to the increase in Market Price.
E3 Firm that operates in a businesslike way to promote the collective interests of its members rather than seek financial gain. Nonprofit Organization
E4 How can taxes influence people’s behavior concerning Home Ownership? Since mortgage interest is deductible, people are more likely to own a home than rent.
E5 ILLUSTRATE & EXPLAIN Impact of a Sin Tax Impact of Taxes P Q Sin Taxes will increase costs, and decrease Supply. Price will RISE and Demand will DECRSEASE. S1 S2 D1 P1 P2 Q1Q2
E6 Progressive Tax A tax that imposes a higher percentage rate of taxation on persons with higher incomes.
E7 Tax levied on consumer purchases that is added to the price, and is paid to the government by the merchant. Sales Tax
E8 Individual Income Tax Tax on people’s earnings.
E9 Concerning the Impact of Taxation, what affect does an Increase in Taxes have on Supply? An increase in taxes causes an increase in costs, thus a decrease in Supply.
E10 What problem faced by Sole Proprietors & Partnerships does forming Corporation help to solve for the Investor? Unlimited Liability
F1 A tax on tangible and intangible possessions such as real estate, buildings, furniture, stocks, etc... Property Tax
F2 Production Possibilities Frontier Fully Employed Resources? A B C B
F3 ILLUSTRATE & EXPLAIN The price of a “complement” increases Change in Demand P Q As a “complement’s” price increases, consumer demand decreases for the other product. The Demand Curve shifts to the LEFT.
F4 If a product HAS “adequate substitutes”, what type of Demand Elasticity does it have? Explain? Elastic – Consumers do not have to deal with a change in price, they can purchase a substitute.
F5 For consumers, what DISADVANTAGE does a Command Economy create? In order to meet the industrial demands, there will be a large cut back on consumer goods.
F6 Federal program that provides health insurance for persons 65 or older. Medicare
F7 In regards to Consumers, how can a company bear the cost of taxes? With an increase in taxes, a company can raise prices to bear the increase in costs.
F8 Business owned and operated by one person. Sole Proprietorship
F9 ILLUSTRATE & EXPLAIN Price Floor Distorting Market Outcomes P Q S1 D1 EP Q1 P1
F10 Which is the biggest difficulty faced by a Sole Proprietorship when looking to expand? Difficulty raising Capital ($)
Illustrate and Explain: Product A & B are complements. What will happen to the demand for Product B if the price of Product A decreases? CLICK HERECLICK HERE Illustrate and Explain: What will happen to supply if workers productivity is increased? CLICK HERECLICK HERE Illustrate and Explain: The potential positive impact of setting a “Minimum Wage” on an Economy: CLICK HERE & HERECLICK HERE HERE Illustrate and Explain: The potential negative impact of using “Rent Controls” on an Economy: CLICK HERE & HERECLICK HERE HERE Illustrate and Explain: What is the intended by placing a Sin Tax on such products as Tobacco and Alcohol? CLICK HERECLICK HERE