# Macroeconomía — Básico (A1/A2) 1: Microeconomics: Supply, Demand, Elasticity & Market Equilibrium > [Español] Macroeconomía: Foundational microeconomic principles: opportunity cost, supply and demand dynamics, price elasticity, surplus, market equilibrium, and price controls - **Canonical URL:** https://flashcards.world/flashcards/sets/d7b16852-0b31-4392-abbf-8a722099b2ab/ - **Markdown URL:** https://flashcards.world/flashcards/sets/d7b16852-0b31-4392-abbf-8a722099b2ab.md - **Level:** basic - **Languages:** es → es - **Total Cards:** 32 ## Flashcards (32 Cards) | # | Front (Term / Prompt) | Back (Definition / Answer) | Example | Multiple-Choice Options | | :--- | :--- | :--- | :--- | :--- | | 1 | What is Price Elasticity of Supply (PES), and what is its primary determinant in the short vs. long run? | The percentage change in quantity supplied divided by percentage change in price; its primary determinant is time, becoming significantly more elastic over longer horizons as firms adjust production capacity. | | | | 2 | What is a binding price ceiling, and what are its market consequences? | A government-imposed maximum price set strictly below the equilibrium price, resulting in persistent shortages, non-price rationing (queues, black markets), and deadweight loss. | | | | 3 | How does a change in price differ from a change in a non-price determinant on a demand curve? | A price change causes a movement along the existing demand curve (change in quantity demanded), whereas a non-price determinant (income, preferences, prices of related goods) shifts the entire curve. | | | | 4 | How does an increase in the price of Good X affect demand for Good Y if they are substitute goods versus complementary goods? | If substitutes, demand for Y increases (shifts right); if complements, demand for Y decreases (shifts left). | | | | 5 | What does a bowed-out (concave to the origin) Production Possibilities Frontier (PPF) illustrate? | The Law of Increasing Opportunity Costs, which occurs because economic resources are not perfectly adaptable to the production of all goods. | | | | 6 | What is consumer surplus, and where is it located graphically on a supply and demand graph? | The difference between the maximum amount consumers are willing to pay and the market price actually paid; graphically, the area beneath the demand curve and above the equilibrium price line. | | | | 7 | How does a price increase affect Total Revenue when demand is price elastic? | Total Revenue decreases, because the percentage drop in quantity demanded is larger than the percentage increase in price. | | | | 8 | What is a binding price floor, and what are its market consequences? | A government-imposed minimum price set strictly above the equilibrium price, leading to persistent surpluses, misallocated resources, and deadweight loss. | | | | 9 | What is opportunity cost in economics? | The value of the next best alternative foregone when a choice is made. | | | | 10 | What causes a market shortage (excess demand), and how does a free market resolve it? | A shortage occurs when price is below equilibrium (quantity demanded > quantity supplied). Upward pressure on price reduces quantity demanded and increases quantity supplied until equilibrium is restored. | | | | 11 | What is the formula for the Price Elasticity of Demand (PED) using the midpoint formula? | PED = [ (Q2 - Q1) / ((Q1 + Q2) / 2) ] / [ (P2 - P1) / ((P1 + P2) / 2) ]. | | | | 12 | What is the economic definition of scarcity? | The fundamental tension between virtually unlimited human wants and finite, limited resources available to satisfy those wants. | | | | 13 | What is an Engel curve in microeconomic theory? | A curve that plots the relationship between the quantity demanded of a good and consumer income, sloping upward for normal goods and bending backward for inferior goods. | | | | 14 | What is producer surplus, and where is it located graphically on a supply and demand graph? | The difference between the market price received by producers and their minimum acceptable supply price (marginal cost); graphically, the area above the supply curve and below the equilibrium price line. | | | | 15 | How are price elastic, inelastic, and unit elastic demand defined by PED magnitude (\|PED\|)? | \|PED\| > 1 is price elastic (highly responsive); \|PED\| < 1 is price inelastic (unresponsive); \|PED\| = 1 is unit elastic. | | | | 16 | How does the relative elasticity of supply and demand determine the economic incidence (burden) of an excise tax? | The more inelastic side of the market bears the larger burden of the tax because it has fewer alternatives to avoid transactions. | | | | 17 | How does Income Elasticity of Demand (YED) categorize goods into normal necessities, normal luxuries, and inferior goods? | YED > 1 indicates a normal luxury; 0 < YED <= 1 indicates a normal necessity; YED < 0 indicates an inferior good. | | | | 18 | State the equimarginal principle (utility-maximizing rule) for a consumer choosing between Goods X and Y. | MU_x / P_x = MU_y / P_y, subject to the consumer's budget constraint, meaning marginal utility per dollar spent must be equal across all consumed goods. | | | | 19 | What is the Law of Diminishing Marginal Utility? | As a consumer consumes additional units of a specific good during a given time period, the extra utility (satisfaction) derived from each successive unit declines. | | | | 20 | How do normal goods and inferior goods respond to an increase in consumer income? | Demand for a normal good increases (curve shifts right), whereas demand for an inferior good decreases (curve shifts left) when income rises. | | | | 21 | What does an indifference curve represent in consumer choice theory? | A graphical curve showing all combinations of two goods that yield the exact same level of total utility to the consumer. | | | | 22 | What does a Cross-Price Elasticity of Demand (XED) value tell us about the relationship between two goods? | If XED > 0, the goods are substitutes; if XED < 0, the goods are complements; if XED = 0, the goods are unrelated. | | | | 23 | How does a price increase affect Total Revenue (TR = P * Q) when demand is price inelastic? | Total Revenue increases, because the percentage drop in quantity demanded is smaller than the percentage increase in price. | | | | 24 | What are the key determinants of Price Elasticity of Demand for a good? | Availability of close substitutes, proportion of income spent on the good, whether the good is a necessity or luxury, and the time horizon under consideration. | | | | 25 | What causes a market surplus (excess supply), and how does a free market resolve it? | A surplus occurs when price is above equilibrium (quantity supplied > quantity demanded). Downward pressure on price increases quantity demanded and reduces quantity supplied until equilibrium is restored. | | | | 26 | What is the Marginal Rate of Substitution (MRS) and how is it related to the slope of an indifference curve? | MRS is the rate at which a consumer is willing to give up good Y for an additional unit of good X while maintaining the same utility; it equals the negative slope of the indifference curve (-dY/dX = MU_x / MU_y). | | | | 27 | What is allocative efficiency in a competitive market equilibrium? | The condition where marginal benefit (demand) equals marginal cost (supply), maximizing total economic surplus (consumer surplus + producer surplus) with zero deadweight loss. | | | | 28 | What is deadweight loss (DWL)? | The loss of total economic surplus that results when an economy produces at an output level where marginal social benefit does not equal marginal social cost. | | | | 29 | State the Law of Supply and explain why the supply curve slopes upward. | Ceteris paribus, as price rises, quantity supplied increases, because higher prices incentivize producers to allocate more resources to production to increase profits. | | | | 30 | What is a Giffen good and why does it violate the standard Law of Demand? | A highly inferior good lacking close substitutes where a negative income effect overpowers the substitution effect, causing quantity demanded to rise as price rises. | | | | 31 | How does the substitution effect differ from the income effect when the price of a good falls? | The substitution effect always induces consumers to buy more of the cheaper good; the income effect reflects the increased purchasing power of real income, increasing consumption of normal goods and decreasing consumption of inferior goods. | | | | 32 | State the Law of Demand and explain the slope of the demand curve. | Ceteris paribus, as the price of a good increases, the quantity demanded decreases, resulting in a downward-sloping demand curve due to substitution and income effects. | | | --- Study this deck interactively with FSRS-6 spaced repetition, audio review, and multiple-choice mode at [Flashcards World](https://flashcards.world/flashcards/sets/d7b16852-0b31-4392-abbf-8a722099b2ab/).