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Economics Microeconomics: Markets and Consumers Flashcards
51 question-and-answer cards covering Microeconomics: Markets and Consumers as it is examined in Economics. 24 of them are printed below, taken from across the deck — no signup, no paywall on the preview.
24 sample cards from the Microeconomics: Markets and Consumers deck
Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.
Define income elasticity of demand (YED) and give its formula.
YED measures the responsiveness of demand to a change in consumer income: $$YED = \frac{\%\,\Delta Q_d}{\%\,\Delta Y}$$
How does the sign and size of YED classify goods?
$YED > 0$ = normal good (of which $YED > 1$ = luxury/income-elastic, $0 < YED < 1$ = necessity/income-inelastic); $YED < 0$ = inferior good (demand falls as income rises).
Define cross elasticity of demand (XED) and give its formula.
XED measures the responsiveness of demand for good A to a change in the price of good B: $$XED = \frac{\%\,\Delta Q_{d,A}}{\%\,\Delta P_B}$$
How does the sign of XED distinguish substitutes, complements and unrelated goods?
$XED > 0$ = substitutes (a rise in B's price raises demand for A); $XED < 0$ = complements (a rise in B's price lowers demand for A); $XED = 0$ = unrelated goods. The larger the absolute value, the stronger the relationship.
Define price elasticity of supply (PES) and give its formula.
PES measures the responsiveness of quantity supplied to a change in the good's own price: $$PES = \frac{\%\,\Delta Q_s}{\%\,\Delta P}$$ It is normally positive.
Classify supply by the value of PES.
$PES = 0$ perfectly inelastic (vertical); $0 < PES < 1$ inelastic; $PES = 1$ unit elastic; $PES > 1$ elastic; $PES = \infty$ perfectly elastic (horizontal).
List the main determinants of price elasticity of supply.
Spare (unused) productive capacity, availability of stocks/inventories, ease and speed of switching factors of production, mobility of factors, and the time period — supply is more elastic in the long run than the short run.
What is an indifference curve?
A curve showing all combinations of two goods that give a consumer the same level of total utility (satisfaction), so the consumer is indifferent between any point on it.
State the four standard properties of indifference curves.
They slope downward (negative gradient), are convex to the origin (diminishing MRS), never intersect one another, and higher curves (further from the origin) represent higher utility.
Define the marginal rate of substitution (MRS) and relate it to marginal utilities.
MRS is the rate at which a consumer will give up good Y for one more unit of good X while keeping utility constant — the slope of the indifference curve: $$MRS_{XY} = -\frac{\Delta Y}{\Delta X} = \frac{MU_X}{MU_Y}$$
What is a budget line, and what is its slope?
A budget line shows all combinations of two goods a consumer can afford given income $M$ and prices $P_X, P_Y$, i.e. $P_X X + P_Y Y = M$. Its slope is the negative price ratio $-\dfrac{P_X}{P_Y}$.
State the consumer's optimum (utility-maximising) condition using indifference curves.
The consumer maximises utility where the budget line is tangent to the highest attainable indifference curve, i.e. where MRS equals the price ratio: $$\frac{MU_X}{MU_Y} = \frac{P_X}{P_Y}$$
Distinguish the substitution effect from the income effect of a price change.
The substitution effect is the change in quantity demanded due to the change in relative prices, holding real income (utility) constant. The income effect is the change in quantity demanded due to the change in real purchasing power caused by the price change.
For a normal good, how do the income and substitution effects combine after a price fall?
Both effects work in the same direction: the substitution effect and the income effect both increase quantity demanded, so demand definitely rises — reinforcing the downward-sloping demand curve.
What is a Giffen good, and how do the income and substitution effects behave for it?
A Giffen good is a strongly inferior good for which the negative income effect outweighs the substitution effect, so a price fall reduces quantity demanded — producing an upward-sloping demand curve.
What does behavioural economics study, and how does it differ from the traditional model?
Behavioural economics studies how psychological, cognitive and emotional factors affect economic decisions. Unlike the traditional model of the fully rational, self-interested 'homo economicus', it recognises bounded rationality and systematic biases.
Define bounded rationality and bounded self-control.
Bounded rationality: people have limited information, time and mental processing power, so they satisfice (choose 'good enough') rather than fully optimise. Bounded self-control: people know what is best but lack the willpower to act on it (e.g. failing to save).
Explain anchoring and the availability heuristic as behavioural biases.
Anchoring: people rely too heavily on an initial reference value (the 'anchor') when making decisions. Availability heuristic: people judge the likelihood of events by how easily examples come to mind, overweighting recent or vivid events.
What is loss aversion, and how does it relate to the endowment effect?
Loss aversion means people feel the pain of a loss more strongly than the pleasure of an equivalent gain. The endowment effect follows: people value a good more highly simply because they own it, demanding more to give it up than they would pay to acquire it.
What is a nudge, and give an example of choice architecture.
A nudge is a design of choices that gently steers behaviour without banning options or changing economic incentives. Example: making pension saving the default option (auto-enrolment) so people must opt out rather than opt in.
What is 'framing' in behavioural economics?
Framing is the way choices are presented, which affects decisions even when the underlying options are identical — for example, describing food as '90% fat-free' rather than '10% fat' influences consumer choice.
What is the paradox of value (diamond–water paradox), and how is it resolved?
Water is essential yet cheap while diamonds are non-essential yet expensive. It is resolved by marginal utility: because water is abundant, its marginal utility (and price) is low, whereas scarce diamonds have high marginal utility and price. Price reflects marginal, not total, utility.
Distinguish substitute goods from complementary goods and state how each shifts demand.
Substitutes are alternatives (e.g. tea and coffee): a rise in one's price raises demand for the other (positive XED). Complements are used together (e.g. cars and petrol): a rise in one's price lowers demand for the other (negative XED).
Why does a demand or supply shock have a bigger price effect when the other curve is inelastic?
With an inelastic curve, quantity responds little to price, so the market must adjust mainly through price. For example, a supply fall for a good with inelastic demand causes a large price rise but a small fall in quantity; with elastic demand the price rise is small and the quantity fall large.
What this deck covers
The Microeconomics: Markets and Consumers deck follows the Economics Microeconomics: Markets and Consumers syllabus — 5 chapters and 17 topics — so questions land on material that is genuinely examinable rather than trivia around it. That works out to roughly 10.2 cards per chapter.
Answers are written to be recallable, not just readable — averaging about 211 characters, which is long enough to carry the reasoning and short enough to say out loud.
A deck like this earns its keep on the second and third pass. Read the syllabus first so you know the shape of the subject, then use the cards to find the specific facts that have not stuck.
Microeconomics: Markets and Consumers flashcards FAQ
How many Microeconomics: Markets and Consumers flashcards are in this Economics deck?
51 cards. This page previews 24 of them, sampled evenly across the deck so you can judge the difficulty before installing anything.
Are these Economics flashcards free?
Yes. The preview here is free to read with no signup, and the full 51-card deck is free inside the Examius app.
What do the Microeconomics: Markets and Consumers cards cover?
They follow the Economics Microeconomics: Markets and Consumers syllabus — 5 chapters and 17 topics — so the questions track what is actually examinable.
How should I use these flashcards?
Read the syllabus first so you know the shape of the subject, then drill the deck. Examius schedules each card with spaced repetition, so cards you keep missing come back sooner and ones you know drift further apart.