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Econ Exam 1
Econ 1000
56
Economics
Undergraduate 1
02/11/2009

Additional Economics Flashcards

 


 

Cards

Term
Economics
Definition
study of how society manages scare resources
Term
resources
Definition
land, labor, capital, output of goods and services
Term
scarcity
Definition

the limited nature of society's resources

 

--> forces us to manage resources

Term
Principle I of Econ
Definition

people face trade offs

 

 

Term
efficiency
Definition
property of society getting the most out of scarce resources
Term
equity
Definition
the property of distributing economic prosperity farily among members of society
Term
Principle 2
Definition
COST OF something is what you have to give up to get it
Term
opp cost
Definition
whatever must be given up to obtain some item
Term
Principle 3
Definition
Rational People think at the margin
Term

margin/ marginal change

 

Definition
small incremental adjustment to a plan of action
Term
Principle 4
Definition
People resond to incentives
Term
Principle 5
Definition
trade can make everyone better off
Term

Production Possibility Frontier

PPF

Definition
graph that shows all posible cominations of output that the economy can possibly produce given the available of production/resources and technology
Term
slope of PPF
Definition
opp cost
Term
bowed out PPF
Definition
increasing opp cost
Term
straight PPF
Definition
constant opp cost
Term
When PPF moves to the left/ right
Definition
loss of resources/ gain resources
Term
2 options for trade
Definition

self sufficiency- produce all goods and services on your own

trade- economics specialize, exchange goods

Term
absolute adv
Definition
ability to produce a good using fewer inputs than another producer
Term
comparative adv
Definition
ability to produce a good at a lower opp cost than another producer
Term
trade price
Definition
calculated by using inputs
Term
market
Definition

group of buyers and sellers of a particular good or service

demand- buyers

supply-sellers

Term
law of demand
Definition

describes the relationship or price and quantity

demand has negative relationship btwn price and quantity

Term
market demand
Definition
demand for all people participating in a market
Term
Increase in Demand- What does curve do
Definition
moves to the right
Term
decrease in demand- what does curve do?
Definition
moves to the left
Term
What causes demand to change?
Definition

Substitutes-2 goods for which an increase in the price of one good leads to increase of demand in the other

Complements- 2 goods for which an increase in price of a good leads to a decrease in demand of the other good

 Income

Number of buyers

Tastes

Expectations

Term
normal good
Definition
a good in which an increase in income leads to increase in demand
Term
inferior good
Definition

a good in which an increase in income leads to a decrease in demand

 

Ex. Ramen noodles

Term
PYNTE
Definition

price of related goods

income

number of buyers

tastes

expectations

Term
Law of Supply
Definition

an increase in price increases quantity supplied and a decrease in price decreases quantity supplied

 

ONLY factor that causes change in QUANTITY SUPPLIED is price

Term
Increase in supply- what does the curve do?
Definition
moves to the right
Term
decrease in supply- what does curve do?
Definition
moves to the left
Term

what causes supply to shift?

(PESTO)

Definition

Price of inputs

expectations

number of sellers

technological inovasions

other (weather)

Term
equilibrium
Definition
a situatuation in which market price has reached a level where quantity supplied equals quantity demanded
Term
surplus
Definition
units of goods not sold (when price is higher than equilibrium price)
Term
shortage
Definition
when quantity demanded is greater than quanitity supplied
Term
Elasticity
Definition
measure of responsiveness of quantity demanded/supplied to one of its determinants (price, income)
Term
elastic
Definition
very responsive to change in price/income
Term
inelastic
Definition
not responsive to changes in price/income
Term
categories of elasticity
Definition

availability of close substitues

Time horizon

necessity vs. luxury

definition of a market

Term
Elasticity price demand equation
Definition
Epd= % change Q/ % change P
Term
E>1
Definition
elastic
Term
E=1
Definition
unit elastic
Term
O<E<1
Definition
inelastic
Term
Income elasticity of demand
Definition
a measure of how much quantity demanded changes in response to a change in income
Term
income elasticity equation
Definition
Ei= %change Q/ %change I
Term
positive income elasticity
Definition
normal good
Term
negative Ei
Definition
inferior good
Term
Cross-price elasticty
Definition
a measure of how much quantity demanded of one good changes in response to a price change in another good
Term
cross pricing equation
Definition
Ec-p= %change Qgood1/ %change Pgood2
Term
positive Ecp
Definition
substitutes
Term
negative Ecp
Definition
complements
Term
Price elasticity of Supply
Definition
measures the responsiveness of quantity supplied to changes in price
Term
determinants of elasticity to supply
Definition

Time Horizon- shorter vs. longer

Type of Good- manufactured vs. beach front prop

 

Term
Supply Elasticity Equation
Definition
Es= %change Qsupplied/ %change P
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