Economics (H)

FINAL REVIEW GAME

DEMAND SIDE

SUPPLY SIDE

MARKET Equilibrium

TERMS CHAPTER 9 STUFF

MISC

10 10 10 10 10 10

20 20 20 20 20 20

30 30 30 30 30 30

40 40 40 40 40 40

50 50 50 50 50 50

60 60 60 60 60 60

70 70 70 70 70 70

80 80 80 80 80 80

90 90 90 90 90 90

100 100 100 100 100 100

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

Q1 Q2

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

Q2 Q1

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 & EXPLAINWorker 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 & EXPLAINIncrease 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 & EXPLAINImpact of a Sin Tax

Impact of Taxes

P

Q

Sin Taxes will increase costs, and decrease Supply.

Price will RISE and Demand will

DECRSEASE.

S1S2D1

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 HERE

Illustrate and Explain: What will happen to supply if workers productivity is increased? CLICK HERE

Illustrate and Explain: The potential positive impact of setting a “Minimum Wage” on an Economy: CLICK HERE & HERE

Illustrate and Explain: The potential negative impact of using “Rent Controls” on an Economy: CLICK HERE & HERE

Illustrate and Explain: What is the intended by placing a Sin Tax on such products as Tobacco and Alcohol? CLICK HERE