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ECON - ALL!!!!
!!!!!!
98
Economics
Undergraduate 2
07/03/2013

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Term
Scarcity
Definition
the finite resources for our infinite wants
Term
Economics
Definition
The social science that looks at how people, businesses, countries etc cope with scarcity
Term
Microeconomics
Definition
Study of choices people and businesses make, and how these are affected by government
Term
Macroeconomics
Definition
Study of total effects on national and global economies
Term
How are self / social interest connected?
Definition
pursuit of self-interest helps the social-interest too
Term
What is US debt?
Definition
6.5 TRILLION!!!
Term
How much credit does US rack up daily?
Definition
Almost 2 BILLION!!!! for over ten years
Term
BASIC IDEA OF ECONOMICS
Definition
Every choice is a TRADEOFF, with MARGINAL COST and MARGINAL BENEFIT
Term
tradeoff
Definition
giving up one thing for something else
Term
Rational Choice
Definition
uses available resources to best achieve goals
Term
Benefit
Definition
The gain or pleasure from a choice, determined by preferences
Term
Opportunity cost
Definition
Best alternative that is lost in decision
Term
Margin
Definition
the line or degree of your decision for / against it
Term
Marginal Cost
Definition
opportunity cost of a one-unit increase for it
Term
Marginal Benefit
Definition
benefit of a one-unit increase of it
Term
NORMATIVE
Definition
OPINION-BASED!!!
Term
POSITIVE
Definition
FACT-BASED!!! POSITIVELY TRUE!!!
Term
Two big ?'s of Economics
Definition
When does self-interest help social-interest?
How do people's choices affect flow of goods?
Term
Production Possibilities Frontier
Definition
Boundary of POSSIBLE EFFICIENT OUTCOMES from a balance of resources
Term
Allocative Efficiency
Definition
When resources are being used to max efficiency
Term
Market Failure
Definition
Firms fail to produce right amount
Term
Producer Surplus
Definition
Excessive price benefit
Term
Consumer Surplus
Definition
Excessive buying benefit
Term
Total Surplus
Definition
Excess on producer and consumer sides
Term
Price Gouging
Definition
Selling NECESSITY for EXPENSIVE!!
Term
Vertical Equity
Definition
Richer pay more
Term
Public Good
Definition
Good that EVERYONE can use at the same time, without using it up
Term
Nonexcludable
Definition
Impossible to prevent others from using it
Term
Nonrival
Definition
Using it doesn't intrude on others
Term
Common Resource
Definition
Rival, but non-excludable.
Fish in rivers, etc
Term
Free Riders happen with _____ good
Definition
PUBLIC
Cuz one person did the work to make it and everybody benefits
Term
Tragedy of commons
Definition
Absence of rules to protect common resources
Term
Moral Hazard
Definition
People's tendency to do bad things when unsupervised
Term
Adverse Selection
Definition
People's tendency to use superior knowledge to scam others
Term
Natural Monopoly Good
Definition
Sewers, etc. Something that is so expensive to start, that it's inefficient to have competing suppliers
Term
Private Information
Definition
Something that only one party has, and uses to their advantage
Term
Asymmetric Information
Definition
When one side has more info than other
Term
Economic Profit
Definition
REVENUE - COST!!
Just like Accounting
Term
Normal Profit
Definition
The cost of Entrepreneurship.
Benefit of staying in a business, and cost of not starting a new one
Term
Short run
Definition
Easiest things to change, like hires / fires, and quick changes
Term
Long run
Definition
Time frame within which EVERYTHING can be changed, ex. amount of buildings, etc
Term
Total Product
Definition
Total quantity produced in a given period
Term
Marginal Product
Definition
Opportunity cost for a one-unit increase in amount of products produced
Term
Economies of Scale
(Increasing return to scale)
Definition
Long-run,
Firm increases labor & capital equally
Output increases faster & cost decreases
Term
Next Total Utility =
Definition
Last Total Utility + Marginal Utility
Term
Diseconomies of Scale
(Decreasing returns to scale)
Definition
Firm increases labor & capital equally
OUTPUT DECREASES!! COST INCREASES!!
Term
Constant returns to scale
Definition
Firm gets bigger (capital & labor) and output increases & cost decreases at perfectly flat rate w it
Term
Marginal Utility
Definition
How much the total utility goes up when you get a 1-unit increase of it
Term
Total Utility
Definition
The total utility from all the stuff u got
Term
Perfect Competition Requires:
Definition
Firms selling IDENTICAL products, EZ to enter/exit, no advantages, SYMMETRIC info, reach constant returns quickly. Can only compete through price
Term
Price Elasticity of Demand Formula
Definition
(Q2 - Q1 / midpoint)
Divided by:
(P2 - P1 / midpoint)
Term
Inelastic
Definition
Price makes SMALL changes in demand
Term
Elastic
Definition
Price makes LARGE CHANGES in demand
Term
Perfectly Elastic
Definition
Straight Across (ONLY BUY AT $1)
Term
Perfectly IN-Elastic
Definition
Up & Down (PPL PAY ANYTHING for set amount)
Term
Factors
Definition
Substitutes? Necessity? Short / Long term price change?
Term
Total Revenue Formula
Definition
Price X Amount Sold
Term
Price Elasticity of Supply
Definition
How a price change affects how many ppl wanna sell it
Term
Elasticity of Supply Formula
Definition
% Change in supply /
% Change in price
Term
PRICE ALWAYS ON BOTTOM???!?
Definition
YUP!! PRICE ALWAYS ON BOTTOM!!
Term
Cross Elasticity of Demand Formula
Definition
% change in Quantity demanded /
% change in PRICE of SUBSTITUTES
Term
Consumer Surplus
(Consumer'S Surplus)
Definition
DIFFERENCE between price ppl would pay and amount available
(Pg. 147)
Term
Elasticity of Price
Definition
How much ppl are still willing to buy when PRICE CHANGES
Term
Efficiency requires
Definition
Everything to be equal
Term
Profit Maximization needs
Definition
Profit to be more than Cost
Term
Benefit Maximization needs
Definition
Benefit greater than Price
Term
Deadweight
Definition
Efficiency loss, from govt intervention, market failure, etc
Term
Externalities
Definition
Outside effects
Term
Things are substitutes if Cross-Price Elasticity goes ______ if one of their prices is raised
Definition
UP!!
Term
Cross Elasticity for guns when:
Swords PRICE is raised 20% and
Guns DEMAND is raised 10%
Definition
10 / 20 = 0.5!!
PRICE GOES ON BOTTOM!!!
Term
CALCULATE PRICE ELASTICITY OF DEMAND?
Definition
(Q2 - Q1) / Q2
OVER
(P2 - P1) / P2
!!!IMPORTANT IMPORTANT!!! (pg 112)
Term
What is a COMPLIMENT???
Definition
IDK!!! LOOK IT UP IN BOOK!!!
Term
Substitute
Definition
Something that can be switched out for something else
Term
Normal Good
Definition
Amount bought goes up with income increase
Term
Inferior Good
Definition
Amount bought GOES DOWN with income increase
Term
How to calculate TOTAL Consumer Surplus?
Definition
CS TRIANGLE:
1/2 * Base (Qd) * Height (price)
Term
Producer Surplus
(Producer'S Surplus)
Definition
Price sold at - Cost to Make it
(pg. 150)
Term
Fair outcomes VS Fair Rules
Definition
The rules are the only ones that should matter
Term
Overhead Cap / Floor
Definition
Government-imposed max / min on prices (rent, food, etc). Creates overall inefficiencies for one side's benefit
Term
Government Actions include
Definition
taxes, price controls (subsidies) & quantity controls (quotas)
Term
Externalities
Definition
Smith's "Self-interest's effects on others"
Term
Public Resources
Definition
Lighthouse, streets, parks, etc
Term
Common Resources
Definition
Finite fish in sea, oil in ground, land
Term
"Free-Rider" / Moocher Problem
Definition
Someone can get benefit from no work, if others do the work
Term
Monopoly
Definition
One company has too much / complete market power
Term
Asymmetric Information
Definition
One side has better information than the other
Term
Fair Outcomes VS Fair Rules
Definition
US Govt not gaining from trade cuz other side will get too much benefit. WTF?!?!?
Term
IN-Elastic
Definition
Price changes have LITTLE EFFECT on amount desired. BUYERS ARE HOOKED!!!
Term
ELASTIC
Definition
Buyer amount changes LARGELY during price changes. THEY STOP IF ITS MORE EXPENSIVE!!!
Term
IN-Elastic
Definition
Price changes have LITTLE EFFECT on amount desired. BUYERS ARE HOOKED!!!
Term
IN-Elastic
Definition
Price changes have LITTLE EFFECT on amount desired. BUYERS ARE HOOKED!!!
Term
Elastic
Definition
Buyer amount changes LARGELY during price changes. THEY STOP IF ITS MORE EXPENSIVE!!!
Term
Elastic
Definition
Buyer amount changes LARGELY during price changes. THEY STOP IF ITS MORE EXPENSIVE!!!
Term
Unit Labor Requirements
Definition
ex. Firm 1 = 5L/A
Means firm 1 uses 5 Labor for 1 good A
Term
Supply comes from
Definition
MARGINAL COST
Term
Autarky
Definition
No trade allowed
Term
Absolute Advantage
Definition
Whoever has lower Unit Labor Requirement
(Can make a good with less labor)
Term
Comparative Advantage
Definition
Whoever can make goods at lower opportunity costs
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