Economics Unit 2 Vocabulary Test Questions – Flashcards
Unlock all answers in this set
Unlock answersquestion
the desire to own something and the ability to pay for it
answer
Demand
question
consumers buy more of a good when its price decreases and less when its price increases
answer
Law of Demand
question
when consumers react to an increase in a good's price by consuming less of that good and more of other goods
answer
Substitution Effect
question
the change in consumption resulting from a change in real income
answer
Income Effect
question
a table that lists the quantity of a good a person will buy at each different price
answer
Demand Schedule
question
a table that lists the quantity of a good all consumers in a market will buy at each different price
answer
Market Demand Schedule
question
a graphic representation of a demand schedule
answer
Demand Curve
question
a good that consumers demand more of when their income increases
answer
Normal Good
question
a good that consumers demand less of when their incomes increase
answer
Inferior Good
question
two goods that are bought and used together
answer
Complements
question
goods used in place of one another
answer
Substitutes
question
a measure of how consumers react to a change in price
answer
Elasticity of Demand
question
describes demand that is not very sensitive to a change in price
answer
Inelastic
question
describes demand that is very sensitive to a change in price
answer
Elastic
question
describes demand whose elasticity is exactly equal to 1
answer
Unitary Elastic
question
the total amount of money a firm receives by selling goods or services
answer
Total Revenue
question
the amount of goods available
answer
Supply
question
tendency of suppliers to offer more of a good at a higher price
answer
Law of Supply
question
the amount a supplier is willing and able to supply at a certain price
answer
Quantity Supplied
question
a chart that lists how much of a good a supplier will offer at different prices
answer
Supply Schedule
question
a factor that can change
answer
Variable
question
a chart that lists how much of a good all suppliers will offer at different prices
answer
Market Supply Schedule
question
a graph of the quantity supplied of a good at different prices
answer
Supply Curve
question
a graph of the quantity supplied of a good by all suppliers at different prices
answer
Market Supply Curve
question
a measure of the way quantity supplied reacts to a change in price
answer
Elasticity of Supply
question
the change in output from hiring one additional unit of labor
answer
Marginal Product of Labor
question
a level of production in which the marginal product of labor increases as the number of workers increases
answer
Increasing Marginal Returns
question
a level of production in which the marginal product of labor decreases as the number of workers increases
answer
Diminishing Marginal Returns
question
a cost that does not change no matter how much of a good is produced
answer
Fixed Cost
question
a cost that rises or falls depending on how much is produced
answer
Variable Cost
question
fixed costs plus variable costs
answer
Total Cost
question
the cost of producing one more unit of a good
answer
Marginal Cost
question
the additional income from selling one more unit of a good; sometimes equal to price
answer
Marginal Revenue
question
the cost of operating a facility, such as a store or factory
answer
Operating Cost
question
a government payment that supports a business or market
answer
Subsidy
question
a tax on the production or sale of a good
answer
Excise Tax
question
government intervention in a market that affects the production of a good
answer
Regulation
question
the point at which quantity demanded and quantity supplied are equal
answer
Equillibrium
question
describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market
answer
Disequilibrium
question
when quantity demanded is more than quantity supplied
answer
Excess Demand
question
when quantity supplied is more than quantity demanded
answer
Excess Supply
question
a maximum price that can be legally charged for a good or service
answer
Price Ceiling
question
a minimum price for a good or service
answer
Price Floor
question
a price ceiling placed on rent
answer
Rent Control
question
a minimum price that an employer can pay a worker an hour for labor
answer
Minimum Wage
question
situation in which quantity supplied is greater than quantity demanded; also known as excess supply
answer
Surplus
question
situation in which quantity demanded is greater than quantity supplied; also known as excess demand
answer
Shortage
question
the financial and opportunity costs consumers pay when searching for a good or service
answer
Search Costs
question
a sudden shortage of a good
answer
Supply Shock
question
a system of allocating scarce goods and services using criteria other than price
answer
Rationing
question
a market in which goods are sold illegally
answer
Black Market
question
costs of production that affect people who have no control over how much of a good is produced
answer
Spillover Costs
question
a market structure in which of a large number of firms all produce the same product
answer
Perfect Competition
question
a product that is the same no matter who produces it, such as petroleum, notebook paper or milk
answer
Commodity
question
any factor that makes it difficult for a new firm to enter a market
answer
Barrier to Entry
question
a market structure that does not meet the conditions of perfect competition
answer
Imperfect Competition
question
the expenses a firm must pay before it can begin to produce and sell goods
answer
Start-Up Costs
question
factors that cause a producer's average cost per unit to fall as output rises
answer
Economies of Scale
question
a market that runs most efficient when one larger firm supplies all of the output
answer
Natural Monopoly
question
a monopoly created by the government
answer
Government Monopoly
question
a license that gives the inventor of a new product the exclusive right to sell it for a certain period of time
answer
Patent
question
the right to sell a good or service within an exclusive market
answer
Franchise
question
a government issued right to operate a business
answer
License
question
division of customers into groups based on how much they will pay for a good
answer
Price Discrimination
question
the ability of a company to change prices and output like a monopolist
answer
Market Power
question
a market structure in which man companies sell products that are similar but not identical
answer
Monopolistic Competition
question
making a product different from other similar products
answer
Differentiation
question
a way to attract customers through style, service, or location, but not a lower price
answer
Non-price Competition
question
a market structure in which a few large firms dominate a market
answer
Oligopoly
question
a series of competitive price cuts that lowers the market price below the cost of production
answer
Price War
question
an agreement among firms to divide the market, set prices, or limit production
answer
Collusion
question
an agreement among firms to charge one price for the same good
answer
Price Fixing
question
a formal organization of producers that agree to coordinate prices and production
answer
Cartel
question
selling a product below cost to drive competitors out of the market
answer
Predatory Pricing
question
laws that encourage competition in the marketplace
answer
Antitrust Laws
question
an illegal grouping of companies that discourages competition
answer
Trust
question
combination of two or more companies into a single firm
answer
Merger
question
the removal of some government controls over a market
answer
Deregulation
