AP®︎ Microeconomics: Unit 2 Flashcards

The relationship between a good's price and the quantity consumers are willing and able to buy.

As price rises, quantity demanded falls; as price falls, quantity demanded rises, ceteris paribus.

A downward-sloping graph showing the relationship between price on the y-axis and quantity demanded on the x-axis.

Quantity demanded is one amount at one price; demand is the entire relationship shown by the curve.

A change in quantity demanded caused only by a change in the good's own price.

A leftward or rightward change of the entire curve caused by a nonprice determinant.

Income, number of consumers, substitutes, expectations, complements, and tastes change demand at every price.

Substitutes are used in place of each other; complements are used together.

When a good becomes relatively more expensive, consumers buy less of it and more of alternatives.

A price change changes purchasing power, altering how much consumers buy of the good.

Each additional unit consumed gives less extra satisfaction than the previous unit.

The total quantity all consumers demand at each price, found by summing individual demands.

A table showing the quantity consumers will buy at different prices.

For normal goods, demand rises as income rises; for inferior goods, demand falls as income rises.

The quantity producers are willing and able to sell at various prices over a period.

As price rises, quantity supplied rises; as price falls, quantity supplied falls.

An upward-sloping graph showing the relationship between price and quantity supplied.

The amount producers offer for sale at a specific price.

The total amount all producers in a market are willing and able to sell.

Add individual quantities supplied horizontally at each price to get market supply.

Resource costs, taxes or subsidies, technology, expectations, and number of sellers.

Higher input prices decrease supply, while lower input prices increase supply.

Taxes decrease supply by raising costs; subsidies increase supply by lowering costs.

Improved production methods increase output per resource unit and shift supply right.

Beliefs about future prices or conditions can increase or decrease current supply.

More firms in a market increase supply; fewer firms decrease supply.

Price changes move along the curve; nonprice determinant changes shift the curve.

A table showing quantities producers will sell at different prices.

Greater than 1 is elastic, less than 1 is inelastic, and equal to 1 is unit elastic.

Infinite means quantity changes completely at one price; zero means quantity does not change with price.

Economists usually ignore the negative sign and compare responsiveness using the coefficient's magnitude.

Responsiveness is based on percentage changes, so it varies along a linear curve even when slope is constant.

It is more elastic at high prices and low quantities, and more inelastic at low prices and high quantities.

The money a firm receives from sales, calculated as price times quantity sold.

Responsiveness depends on factors like substitute availability, necessity, budget share, and time to adjust.

The percent change in quantity demanded divided by the percent change in price.

Price and total revenue move opposite for elastic, together for inelastic, and not at all for unit elastic demand.

A method using average price and quantity to calculate percent changes symmetrically.

Greater than 1 is elastic, less than 1 is inelastic, and equal to 1 is unit elastic.

Zero means quantity supplied never changes; infinity means suppliers will supply any amount at one price.

Responsiveness depends on production flexibility, time, and the availability and prices of alternative inputs.

The percent change in quantity supplied divided by the percent change in price.

Measures responsiveness to changes in variables other than the good's own price.

Percentage change in quantity demanded divided by percentage change in consumer income.

A value of zero means income changes do not affect quantity demanded.

Percentage change in quantity demanded of one good divided by percentage change in another good's price.

Positive values mean substitutes, negative values mean complements, and zero means unrelated goods.

The maximum price a consumer is willing and able to pay for a good.

The lowest price a producer is willing and able to accept for a good.

Consumer surplus is above price and below demand; producer surplus is below price and above supply.

Use triangle area formula: one-half times base times height for each shaded region.

A trade in which both buyer and seller expect to be better off.

The intersection where quantity demanded equals quantity supplied, creating no shortage or surplus.

The sum of consumer surplus and producer surplus in a market.

The difference between buyers' willingness to pay and the market price they actually pay, individually or in total.

The difference between the market price and sellers' minimum acceptable price, individually or in total.

The market price and quantity where quantity demanded equals quantity supplied.

At the competitive equilibrium quantity, total economic surplus is maximized and resources are allocated efficiently to the buyers who value the good most.

A market state where quantity demanded does not equal quantity supplied.

Prices rise during shortages and fall during surpluses until quantity demanded equals quantity supplied.

Price controls create shortages or surpluses; shifted curves create a new equilibrium where quantity demanded equals quantity supplied.

When supply and demand shift together, one outcome may be certain while the other is indeterminate.

Subtract quantity supplied from quantity demanded at a given price to find the market imbalance.

Use the areas of the relevant triangles or rectangles before and after the market change.

The size of price, quantity, and surplus changes depends on demand and supply elasticities.

A shortage means quantity demanded exceeds quantity supplied; a surplus means the opposite.

Demand shifts change price and quantity together, while supply shifts change them in opposite directions.

The loss of total surplus when output is moved away from the efficient equilibrium quantity, such as by market disequilibrium or government intervention.

A fixed tax on each unit sold, shifting supply left or demand left.

Money collected by the government, equal to tax per unit times quantity sold.

Government spending on a subsidy, equal to subsidy per unit times quantity exchanged.

Buyer and seller gains shrink or shift when taxes, subsidies, or price controls change price and quantity.

Government-set price minimums or maximums that affect markets only when they are binding.

A legal maximum price that, when below equilibrium, creates a shortage.

A legal minimum price that, when above equilibrium, creates a surplus.

A government payment per unit that shifts supply or demand outward and increases quantity traded.

The division of a tax or subsidy burden depends on relative supply and demand elasticity.

A government limit on output that sets quantity below or above the market equilibrium.

A situation where a country does not trade internationally and relies only on domestic markets.

The price of a good on the international market, which domestic buyers and sellers take as given.

The amount bought from foreign producers, equal to domestic quantity demanded minus domestic quantity supplied.

Government income from a tariff, equal to the tariff per unit times the number of imports.

The lost total surplus caused when tariffs or quotas reduce mutually beneficial trades.

Domestic price moves to world price, changing surpluses and creating imports or exports.

A tax on imports that raises domestic price, reduces imports, and creates government revenue.

A limit on imports that raises domestic price, reduces consumption, and increases domestic production.

The amount sold abroad, equal to domestic quantity supplied minus quantity demanded.