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Questions and Answers
How does a minimum wage, set above the equilibrium wage, affect the labor market?
How does a minimum wage, set above the equilibrium wage, affect the labor market?
- It creates a shortage of labor, as more workers are demanded.
- It has no effect on the labor market if set correctly.
- It leads to a surplus of labor, resulting in unemployment. (correct)
- It always leads to increased efficiency and productivity.
If the price of coffee increases significantly, what is the likely effect on the demand for tea, assuming they are substitutes?
If the price of coffee increases significantly, what is the likely effect on the demand for tea, assuming they are substitutes?
- The demand for tea will increase. (correct)
- The supply of tea will decrease.
- The demand for tea will decrease.
- The demand for tea will remain unchanged.
A bakery increases its output by 50% when it hires two additional workers. This is an example of:
A bakery increases its output by 50% when it hires two additional workers. This is an example of:
- Constant returns to scale.
- Increasing marginal returns. (correct)
- Diseconomies of scale.
- Decreasing marginal returns.
When demand is inelastic, what happens to total revenue if a firm increases its price?
When demand is inelastic, what happens to total revenue if a firm increases its price?
How do subsidies typically affect the market supply curve?
How do subsidies typically affect the market supply curve?
Which of the following factors is most likely to cause a shift in the market supply curve for wheat?
Which of the following factors is most likely to cause a shift in the market supply curve for wheat?
What does the 'law of demand' state?
What does the 'law of demand' state?
What distinguishes a 'normal good' from an inferior good?
What distinguishes a 'normal good' from an inferior good?
How is 'marginal revenue' typically calculated?
How is 'marginal revenue' typically calculated?
How does 'regulation' impact a market?
How does 'regulation' impact a market?
Flashcards
Market System
Market System
A system where prices of goods/services are determined by supply and demand.
Minimum Wage
Minimum Wage
A government-mandated lower limit on the wage employers can pay.
Equilibrium
Equilibrium
The point where supply and demand curves intersect, indicating a stable price and quantity.
Law of demand
Law of demand
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Elasticity of Demand
Elasticity of Demand
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Total Revenue
Total Revenue
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Complement
Complement
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Substitute
Substitute
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Variable Cost
Variable Cost
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Demand Curve
Demand Curve
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Study Notes
- Market System: An economic system where prices and quantities of goods and services are determined by supply and demand.
- Minimum Wage: A legally mandated price floor on hourly wages.
Equilibrium
- The point where supply and demand curves intersect, indicating a stable price and quantity.
Law of Demand
- States that as the price of a good or service increases, the quantity demanded decreases, and vice versa.
Elasticity of Demand
- Measures how much the quantity demanded of a good responds to a change in its price.
- Demand is elastic if quantity demanded changes significantly with price changes.
Total Revenue
- The total amount of money a firm receives from selling its product, calculated as price multiplied by quantity.
Complement
- A good or service that is consumed with another good or service.
Substitute
- A good or service that can be used in place of another good or service.
Variable Cost
- Costs that change with the quantity of output a firm produces.
Demand Curve
- A graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time.
Increasing Marginal Returns
- When the marginal product of labor increases as more workers are hired.
Marginal Revenue
- The additional revenue gained from selling one more unit of a good or service.
Regulation Variable
- A tool used by governments to influence economic activity.
Market Supply Curve
- A graphical representation of the quantity of a good or service that sellers are willing to supply at various prices.
Inelastic
- Describes demand that is not very responsive to price changes.
Subsidies
- Financial assistance from the government to support a particular industry, market or cause.
Substitution Effect
- The change in consumption patterns due to a change in the relative prices of goods.
Quantity Supplied
- The amount of a good or service that sellers are willing and able to sell at a particular price.
Marginal Cost
- The additional cost of producing one more unit of a good or service.
Normal Good
- A good for which demand increases as consumer income rises.
Regulation
- Government intervention in a market to control or change economic behavior.
Total Cost
- The sum of all costs a firm incurs in producing a good or service, including both fixed and variable costs.
Marginal Product of Labor
- The additional output produced by hiring one more unit of labor.
Supply Schedule
- A table that shows the relationship between the price of a good or service and the quantity supplied.
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