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micro economics
micro economics
50
Economics
Undergraduate 1
02/19/2013

Additional Economics Flashcards

 


 

Cards

Term
What is Economics
Definition
The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided
Term
What is microeconomics
Definition
The study of econimics that examins the functioning of individual industries and the behavior of individual decision making
Term
Positive economics
Definition
Seeks to understand behavior and operations of systems without judgement. What exists and how it works
Term
Normative economics
Definition
Analyzes ourcomes of economic behavior. Evaluates as good or bad. May prescribe course of action.
Term
What is the goal of models and theory in economics
Definition
Model: Formal statement of a theory
Term
Why is abstraction an important part of model building?
Definition
Abstraction removes irrelevant detail to allow a concise picture of reality.
Term

Ceteric poribus

and why is it important?

 

Definition

all else equal

Makes it easier to see the relationship between two variables without outside influence

Term
Efficiency
Definition
Produces what the people want at the lease posible cost.
Term
What does equality mean in economics?
Definition

fariness.

ex: rent, social welfare

Term

What is scarcity?

Why is economics important in a world of scarcity?

Definition

unlimited want

limited resources

Term
What are the three basic questions that every society must answer as a result of scarcity
Definition

What gets produced?

How is it produced?

To who is it distributed?

Term

What is opportunity cost?

How does it differ from monetary cost?

 

Definition

Best alternative forgone

Money given up/time given up with decision

Term

What is corpartive advantage?

How does it differ from absolute advantage?

 

Definition

Good can be produced at lower opportunity cost.

Can produce more/can produce with less resources.

Term
How can specialzation and exchange make people better off in the face of conparitive advantage?
Definition
More goods produced w/ specialzatin. Even with one party holding all absolute advantage.
Term
What does the production possibilities froutier represent?
Definition
All posible conbination of goods and services that can be produced if resources are used efficiently.
Term
How does the slope of the production possibilities frontier relate to opportunity cost?
Definition
Society can choose only one point on the curve
Term

Why does the opportunity cost of a good rise as a society produces more of it?

 

Definition
The best resources for x are theoreticially already allocated to produce x.
Term

How can you use the production possibilities frontier to illustrate inefficient use of resources?

 

Definition
A point within the curve
Term
What types of economic systems do societies use to answer the three basic questions?
Definition

Command economy: central government sets output targets, incomes, and prices

Laissez-Faire economy: pursue self interest w/o government intervention.

we use a mix of these two...

called a mixed economy you fuck'n dum ass

Term

What roles do firms and households play in the economy?

In what markets do they interact?

What do households provide to firms?

What do firms provide to households?

 

Definition

Firms:transform resources into product producing units.

Households: consuming units

Term

What is the demand schedual?

What is the demand curve?

Definition

Demand schedual: A table showing how much of a given product a household would be willing to buy at a different price

Demand Curve: A graph illustrating how much of a given product a household would be willing to buy at a different price

Term
What is the law of demand? Why does it hold?
Definition
As prices rise, quality demanded decreases
Term

What other factors affect the demand for a product?

What impacts are changes in these factors going to have?

 

Definition

Income and wealth

other prices

Expectations

tastes and preferences

Term

What are substitutes and complementary goods?

What happens to the demand for somthing when the price of one of its subsitutes rises, ceteris poribus?

One of its compliments rises?

Definition

substitutes: Goods that can serve as replacement for another.

When price for one increases demand for the other increases.

complementary: Goods that go together.

A decrease in price in one increases demand for the other

Term

What are normal and inferior goods?

What happens to the demand for each when income rises?

Why is ceteris poribus important in the last two questions?

Definition

Normal:Demand goes up when income goes up

Inferior: Demand goes up when income decreases

Other factors effecting demand

Term

What causes the demand curve to shift?

What causes the quantity demand to change?

 

Definition
Any factor other than a change in price that changes demand.
Term

What is the difference between household demand curves and the market demand curve?

 

Definition
Market demand is the sum of all household demands.
Term

What is a supply schedual?

What is a supply curve?

Definition

supply schedual: a table showing how much of a product firms will sell at alternative prices.

Supply curve: a graph showing how much of a product firms will sell at alternative prices.

Term

What is the law of supply?

why does it hold?

Definition
Law of supply: an increase in market price will lead to an increase in quantity supplied and a decrease in market price will lead to a decrease in quantity supplied
Term

What other factors affect the supply for a product?

What impacts are changes in these factors going to have?

Definition

Cost of production:lower cost=higher output/supply

higher cost=lower output/supple

prices of related products.

Term

What causes the supply curve to shift?

What causes quantity supplied to change?

Definition

Shift: when factors other than price change it

Quantity supplied:change movement along the supply curve

Term
What is the relationship between firms supply curve and the market supply curve?
Definition
Market supply is the sum of all that is supplied by all producers at a single product.
Term

What are the equilibium price and quantity?

How do you find them on a supply abd demand curve?

Definition
Quantity supplied and demanded are equal.
Term

What is excess demand?

What does demand imply about the price?

Definition

More demand than quantity supplie?

price is too low

Term
What two roles does the the market system play in dealing with the problems of scarcity? How do these roles differ?
Definition
It decides who gets goods when quantity demanded exceeds the quantity supplied and determines allocation of resources among producers final mix of outputs
Term

When the market rations the existing supply of a good, who gets it?

Why might people object to the fairness to the result?

Definition

Those who are willing and able to play the most get it.

The rich get it.

I get it

That's why they call me cash

Term

What are price ceilings and price floors?

How else might good be rationed if the market is not able to reach an equilibrium?

Definition

ceiling: max price; set below equilibrium

floor: min price; set above equilibrium

Term

What is consumer surplus?

How can you measure that consumers receive from purchasing a given quantity of a good from the demand curve for that good?

Definition
consumer surplus: the difference between the max amout a person is willing to pay for a good and its current market price.
Term
What happens to the sum of producer and consumer surplus at the equilibrium of a competitive market?
Definition
Total surplus is greatest at equilibrium
Term

What is dead weight loss?

How does over production or under production (compared to the competive equilibrium quantity) lead to deadweight loss?

How can you measure the deadweight loss from over production or under production from a supply and demand diagram?

Definition

Dead weight loss: total loss of producer and consumer surplus from under production or over production

over production: loss of producer surplus

Under production: loss of consumer surplus

 

Term

What is elasticity?

In what terms does it measure the responsiveness of one variable to another?

Definition

A general concept used to quantify the respon in one variable when another variable changes

Elasticity of A with respect to B:

%(change in A)/%(change in B)

Term
What does the price elasticity of demand measure?
Definition

Price elasticity of demand: The ratio of the precentage of change in quantity demanded to the percentage of change in price

Measures the responsiveness of quantity demanded to changes in price

Term
What is ment by inelastic demand?
Definition
When demand is more verticle
Term
What is ment by elastic demand
Definition
when demand is more horrizontal
Term
How does the elasticity of demand vary along a straight line demand curve?
Definition
Demand becomes less elastic as price decreases
Term

What is the relationship between the elasticity of demand for a good and the revenue obtained from its sales?

 

Definition
Effect of price increases on product with elastic demand
Term
What factors determin whether the elasticity of demand for a product is large or small?
Definition

avaiablity of a substitutes

small/unimportant goods

time

Term
What is the income elasticity of demand and how is it related to whether goods are normal or inferior?
Definition

income elasticy of demand

(change in quantity demanded)

/

(chang in income)

+=normal good

-=inferior good

Term
What is the cross-price elasticity of demand and how it it related to whether goods are complements or substitutes?
Definition

(change in quantity of good y demanded)

/

(Change in price of x)

+=goods are substitutes

-= goods are complements

 

Term
What does the elasticity of supply measure?
Definition

A measure of the response of the quantity of a good supplied to a change in price of that good.

likely positive.

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