Exam 1 Study Guide B

Exam 1 Study Guide B - T radeoff to achieve greater...

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Unformatted text preview: T radeoff- to achieve greater equality, could redistribute income from wealthy to poor; shrinks the size of the economic “pie” Technology- determines how much inputs are require to produce a unit of output Surplus- (a.k.a. excess supply) when the qty supplied is greater than qty demanded (where the supply line is to the right of the demand line); sellers t ry to increase sales by cutting prices, and this will continue until market reaches equilibrium Supply Schedule- a table showing the relationship between the price of a good and the qty supplied; positive relationship Supply Curve- shows how price affects qty supplied, other things (non-price determinants of supply) being equal Substitution Effect- a fall in P(fish) makes mangos more expensive relative to fish causes Hurley to buy fewer mangos and more fish (the effect on mangos is ambiguous) Substitutes- if an increase in the price of one good causes an increase in demand for the other (Coke and Pepsi) Shortage- (a.k.a. excess demand) when qty demanded is greater than qty supplied (where the supply line is to the left of the demand line); sellers raise prices until market reaches equilibrium Scarcity- the limited nature of society’s resources S-Curve- when vertical, elasticity=0; when relatively steep, elasticity < 1; when intermediately steep, elasticity=1; when relatively flat, elasticity > 1; when horizontal, elasticity is infinity Revenue- Price x Quantity (P x Q) Quantity Supplied- the amount that sellers are willing and able to sell Quantity Demanded- the amount of the good that buyers are willing and able to purchase (not need/want) Principle 6- markets are usually a good way to organize economic activity Principle 5- trade can make everyone better off Principle 4...
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This note was uploaded on 09/27/2011 for the course ECON 101 taught by Professor Gottlieb during the Spring '08 term at Rutgers.

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Exam 1 Study Guide B - T radeoff to achieve greater...

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