ECO 201 Exam II Study Guide

ECO 201 Exam II Study Guide - Exam II Study Guide Chapter 4...

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Exam II Study Guide Chapter 4 Market - a group of buyers and sellers of a particular good or service (64). Competitive market - a market where there are many buyers and sellers so that each had a negligible impact on the market price (64). Quantity demand - the amount of a good that buyers are willing and able to purchase (65) Law of demand - the claim that the quantity demanded of a good falls when the price of a good rises (65). Demand schedule - a table showing the relationship between the price of a good and the quantity demanded (65). Demand curve - a graph of the relationship between the price of a good and the quantity demanded (66) Normal good - a good for which an increase in income leads to an increase in demand (a car)(68). Inferior good - a good for which an increase in income leads to a decrease in demand (bus rides) (68). Substitutes - two goods for which an increase in the price of one leads to an increase in demand for the other (SUV and minivans) (68). Complements - two goods for which an increase in the price of one leads to a decrease in demand for the other (gas and cars) (68). Quantity supplied - the amount of a good sellers are willing to sell (71). Law of supply - the quantity supplied of a good rises when the price of a good rises (71). Supply schedule - a table that shows the relationship between the price of a good and quantity supplied (71). Supply curve - a graph that shows the relationship between price of a good and quantity supplied (71). Equilibrium - a situation in which the market price has reached a level at which quantity supplied equals quantity demanded (75)
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Equilibrium price - the price that balances quantity supplied and quantity demanded (75) Equilibrium quantity - the quantity supplied and quantity demanded at the equilibrium price (75). Surplus - a situation in which quantity supplied is greater than quantity demanded (76) Q S > Q D Shortage - a situation in which the quantity demanded is greater than the quantity supplied (76) Q S < Q D Law of supply and demand - the price of any good adjusts to bring the quantity supplied and quantity demanded into balance (77) Chapter 5 Elasticity - a measure of the responsiveness of quantity demand or quantity supplied Price Elasticity of Demand - how much the quantity demanded of a good responds to a change in price of that good (as a percentage change) P Q d = % % ε Total revenue - the amount paid by buyers and received by sellers of a good (Price * Quantity) Income elasticity of demand - how much the quantity demanded of a good responds to a consumer’s income Cross price elasticity of demand - how much the quantity demanded of one good responds to a change in price of another good Price elasticity of supply - how much the quantity supplied of a good responds to a change in price Chapter 6 Price ceiling - a legal maximum on the price at which a good can be sold
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Price floor - a legal minimum on the price at which a good can be sold Tax incidence - the manner in which the burden of a tax is shared among participants in a
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ECO 201 Exam II Study Guide - Exam II Study Guide Chapter 4...

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