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Definition
1. A theory of choice and its unintended consequences
2. A way of thinking about actions, interactions, and consequences. |
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1. It's usually spontaneous / no central direction
2. Achieved through mutual interactions |
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1. Affect Incentives
2. Are property rights |
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| A condition under which an individual must choose/sacrifice/trade off to obtain more of what he or she wants. |
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| If you want something, you have to sacrifice, or give up something else to get it. |
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| Social cooperation without any central direction |
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| A process of adjusting to the environment and others in the environment in order to achieve your goal with minimum c |
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| Different people value different things. Homer Simpson likes his steak. Lisa Simpson likes cows to be cute and alive. |
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| Anything that a person values. |
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| 1. Trade makes us wealthier by getting stuff into the hands of people who value it more. |
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| The value of the next best opportunity that you sacrifice when making a decision. |
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Term
| PRODUCTION POSSIBILITIES FRONTIER (PPF) |
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Definition
A graphical Representation of opportunity cost.
The X and Y axises are labeled as the quantity produced of products X and Y respectively. |
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Definition
| The ability to produce something at a lower opportunity cost than someone else producing the same thing. |
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| All of the costs required to arrange contracts and agreements with trading partners. |
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| What two things expand both parties PPF? |
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| Produce that scarce good that is information. |
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| Following your comparative advantage. |
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Definition
| 1. Everyone has them--the question is not What are they? but How do we get them? |
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Definition
| If we can reach our goals using fewer resources, we'll do it. Think ramen. |
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| MARGINAL THINKING/ANALYSIS |
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Definition
| Weighing expected additional benefits against expected additional costs. |
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Definition
| 1. The inverse relationship between price and quantity demanded. Not quantity. Quantity Demanded. As price goes up, Qd goes down, and vice versa. |
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Definition
| Always refers to a relationship between a quantity and a price. |
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Definition
| Is a schedule/curve that covers a range of prices. |
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Definition
Things that are not price that change, and by doing so, change a demand curve.
A Change In...
1. Number of Consumers
2. Tastes and Preferences
3. Income
4. Price of Substitutes
5. Price of Complements
6. Expected Price of the good |
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Definition
| A Change in the NUMBER OF CONSUMERS |
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Definition
| A change in TASTES AND PREFERENCES |
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Definition
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| A change in the PRICE OF SUBSTITUTES |
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Definition
| A change in the PRICE OF COMPLEMENTS |
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Definition
| A change in the Expected Price of the Good |
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| PRICE ELASTICITY OF DEMAND |
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Definition
| The Responsiveness of quantity demanded to changes in price |
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| PRICE ELASTICITY OF DEMAND formula |
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Definition
% Change in quantity demanded
_______________________________
% Change in Price |
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Term
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Definition
| Quantity demanded is very responsive to changes in price. When the final number is greater than one! |
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Term
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Definition
| Quantity demanded is not very responsive to changes in price. When the number is less than one. |
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Term
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Definition
Every Scarce Good Must Be Rationed!
-willingness to pay
-lottery
-first come, first served
-might makes right
etc. |
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Term
| Describe the Midpoint Method |
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Definition
1. Find the percent change in Qd: The difference between the two numbers divided by the midpoint between the two numbers, multiplied by one hundred.
2. Find the percent change in price the same way.
3. Divide the percent change in quantity demanded by the percent change in price. |
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Term
| When Demand is inelastic, price changes and revenue... |
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Definition
| Move in the same direction. |
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Term
| When demand is elastic, price changes and revenue changes... |
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Definition
| move in opposite directions. |
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Definition
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Term
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Definition
| We care about the sacrifices we make when buying or producing things. The cost of resources used to produce things depends on their Alternative uses. |
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| PRODUCER'S COSTS AS OPPORTUNITY COSTS |
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Definition
| The cost of producing one thing depends on the relative prices of Alternative Uses! Like, would a certain piece of land be better suited for growing corn than soybeans? |
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Term
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Definition
| Show us the opportunity costs that must be covered to induce potential suppliers to make particular goods available. Slope UPWARD! |
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Term
| At higher quantities of supply... |
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Definition
| ...you have to start using resources that are less suited to the particular product you are producing. |
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Term
| WHAT SHIFTS A SUPPLY CURVE? |
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Definition
1. change in price of an alternate product
2. price of a production input changes
3. change in production technology
4. change in expectation of future prices.
5. change in number of suppliers. |
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Term
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Definition
| A process of negotiations between buyers and sellers to coordinate their activities! |
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Definition
| when there is more product supplied than demanded |
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Term
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Definition
| When there is more demand for a product than there is supply of a product. |
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Term
| EQUILIBRIUM / MARKET CLEARING PRICE |
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Definition
1. The point at which supply and demand curves cross.
2. The price at which there is no shortage or surplus. |
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Term
| Markets are a process by which... |
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Definition
| buyers and sellers coordinate their plans |
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| Buyers compete against... |
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Definition
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| Sellers compete against... |
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Definition
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Definition
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Term
| SELLERS cooperate with... |
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Definition
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Term
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Definition
1. Legally established MAX price
2. Usually set below equilibrium price |
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Term
| Price ceilings tend to increase NON-MONETARY COSTS like... |
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Definition
1. Waiting in line
2. Searching for Suppliers
3. In-kind payments
because PRICE CEILINGS CREATE SHORTAGES! and DISCOURAGE INNOVATION! |
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Term
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Definition
1. Legally established minimum price
2. Set Above equilibrium price
Create surpluses, higher prices |
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Term
| UNINTENDED CONSEQUENCES of price floors and ceilings |
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Definition
| 1. Create longer lines, higher prices, surpluses or shortages, discourage innovation, and DON'T SOLVE SCARCITY! |
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Term
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Definition
| Total Revenue - total Explicit Costs |
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Term
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Definition
| Direct monetary costs, like wages, rent, supplies, and advertising. |
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Definition
| Total Revenue - Total Explicit Costs - Total Implicit (opportunity) costs = economic profit. |
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Term
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Definition
| Include opportunity costs |
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Term
| Out of ECONOMIC and ACCOUNTING profits, which of the two does not take into account opportunity/implicit costs? |
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Definition
| Accounting Profit does not take into account opportunity costs. |
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Term
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Definition
| Residual, not contractually guaranteed the same way wages, rent, and interest are, and it is necessarily risky. |
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Term
| What roles do Profits play in society? (not the biblical kind.) |
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Definition
1. Incentive (if I serve others well, they will reward me)
2. Guide (profit shows me how people like to be served) |
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Definition
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Definition
| New things / new ways of making things |
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Definition
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Term
| what is an ENTREPRENEUR? / What do they do? |
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Definition
| Someone who tries to reorganize how we live...They create NEW KNOWLEDGE about what is valuable and who can create value. |
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Term
| What allows for Entrepreneurship? |
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Definition
| Open entry and exit / freedom to try and fail. The opportunity. |
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