ECON Exam #1

Opportunity Cost - ANSWER-the cost of a choice is the value of the opportunities lost Marginal Analysis - ANSWER-An examination of the additional benefits of an activity compared to the additional costs of that activity Microeconomics - ANSWER-The practice of household/firm economics Macroeconomics - ANSWER-The practice of large-scale economics Quantity Demanded - ANSWER-describes the quantity that buyers desire to purchase given the price and all other factors that affect purchase decisions Demand - ANSWER-describes the relationship between price and quantity demanded over some time period Reading Demand curves horizontally - ANSWER-Move horizontally to the demand curve to find the highest Qd consumers would be willing to purchase at that price Reading Demand curves vertically - ANSWER-Move vertically to the demand line to find the highest price that consumers would be willing to pay to purchase that quantity Consumer Surplus - ANSWER-Measures differences between price paid and max. willingness-to-pay for each unit traded, the area below Demand and above the price Price changes cause movement along Demand - ANSWER-Price changes DO NOT change demand and DO NOT shift demand curves 1 Shift Factors of Demand - ANSWER-1 Changes in tastes 2 Shift Factors of Demand - ANSWER-2 Changes in income (normal vs. inferior) 3 Shift Factors of Demand - ANSWER-3 Changes in population 4 Shift Factors of Demand - ANSWER-4 Changes in prices of substitutes 5 Shift Factors of Demand - ANSWER-5 Changes in prices of complements 6 Shift Factors of Demand - ANSWER-6 Changes in expectations Normal Good - ANSWER-Increased income causes increased demand and vis a versa (cars/clothing)