Term
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Definition
| unit of analysis is the individual or firm. Looking at one person’s behavior, one firm’s choice, do you have a job, the price of a pez dispenser, etc… We look at the trees. |
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Term
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Definition
| considers economy wide aggregates. Looks at overall unemployment rates, level of output for the economy, price levels, etc … We look at the forest. |
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Term
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Definition
| simplified representations of the world |
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Term
1.Simple- easy to understand
2.General- apply to a number of situations
3.Useful- accurately predict observed behavior |
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Definition
| What are desirable characteristics of economic models? |
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Term
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Definition
| What is not a desirable characteristic? |
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Term
| Rational and Self Interested |
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Definition
| Economist often assume that people are ______ and _______. |
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Term
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Definition
| statements of facts, of what is, or what would occur if something else were to happen. Must be true or false. |
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Term
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Definition
| express value judgments. They state what should be. Cannot be true or false. “Should” or “ought” are give aways. |
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Term
| Fallacies of economic reasoning |
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Definition
| mistakes of logic commonly made |
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Term
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Definition
| This occurs when someone says what is true for one person must be true for everyone. If you stand at a sporting event you will get a better view. Everyone standing will not get a similar improvement for each person. |
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Term
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Definition
| This occurs when someone says that since event A occurred before event B, it must be the case that A caused B. Here we see sequence, and assume cause. |
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Term
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Definition
| This occurs when someone says that since two events occurred together in the past, they will continue to occur together in the future. |
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Term
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Definition
| Sometimes people make comparisons in a way that does not reflect their true differences. Most of the time, this mistake occurs due to an omission of inflationary adjustments in the argument. |
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Term
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Definition
| This occurs when people use data that is not typical, but instead is selected in a way that biases the results. Trying to determine the drinking behavior on campus would be biased if we only collected data from people at bars, or only at the library. |
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Term
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Definition
| limited resources, unlimited wants |
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Term
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Definition
| If good X is a scarce good for you, you are willing to give up something else of value in exchange for more of good X (need not be money). |
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Term
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Definition
| the highest valued foregone alternative |
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Term
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Definition
| The ____________ of activity X can best be answered with the question “what would I have done instead if I hadn’t done activity X?” |
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Term
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Definition
| Every time a choice is made a cost is __________. |
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Term
| Production Possibilities Curve (PPC) |
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Definition
| shows the maximum amount of goods and services that can be produced, for a given level of technology and resources. |
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Term
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Definition
| Points outside the PPC are _____. |
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Term
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Definition
| Points inside the PPC are ________, as society is not producing as much output as is possible with the given resources and technology. In other words, resources are being wasted. |
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Term
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Definition
| Points actually on the PPC are ______ (society can do not better with the resources and technology). |
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Term
| outward (to the right) / economic growth |
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Definition
| If we add resources or improve technology, this will shift the PPC _______(_______). This is called ________. |
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Term
| inward / economic contraction |
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Definition
| If we have fewer productive resources or degrade technology, this will shift the PPC ______.This is called _____________. |
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Term
| absolute advantage / absolute advantage |
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Definition
To determine who has the ______________ in an activity, we have both people completely specialize in that activity. Whoever is
capable of producing the most of the good has the ______________________. |
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Term
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Definition
| producing a bundle different than the bundle you consume |
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Term
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Definition
| spending all time producing only one good |
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Term
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Definition
| _____________ is the highest valued foregone alternative. |
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Term
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Definition
| It will always be the case that if person A has the _____________ in one good, person B has the comparative advantage in the other good. |
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Term
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Definition
| is just another term for self-sufficiency |
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Term
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Definition
| By specializing, and producing the good in which they have a comparative advantage, each of them ______. |
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Term
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Definition
| It is _____ that allows them to specialize. You can’t have specialization without __________. |
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Term
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Definition
| We say trade is _______________. |
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Term
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Definition
| If you have each person specialize in the wrong activity, you will get a _____ , but this will make your PPC bowed _____ . You will end up at an inefficient point |
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Term
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Definition
| The opportunity cost of one activity is always measured in terms of ___________. That is, if you want to know the opportunity cost of producing a banana, it is always measured in terms of fish. |
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Term
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Definition
As we produce more and more of a good, the resources that are being used to produce it will be less suited to its production, and thus the opportunity cost of
producing it will ______. |
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Term
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Definition
How much it is worth to consume a certain quantity of goods. It is always
increasing, but at a decreasing rate. |
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Term
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Definition
When you just can’t decide. We say
that you are _______ between the two choices – you are willing to let someone else choose which you will have. |
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Term
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Definition
| the change in total value for each (one) additional unit of consumption. |
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Term
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Definition
When we talk about marginal stuff,
we are talking about making ____ changes. |
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Term
| Principle of diminishing marginal value |
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Definition
| As the rate of consumption increases, the marginal value falls. |
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Term
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Definition
| people choose to consume at a rate of consumption such that marginal value is just equal to the market price. |
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Term
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Definition
| Since a _________ is really a MV curve, the height of a demand curve at quantity q, say, shows us the marginal value of consuming the qthunit. |
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Term
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Definition
| shows us a relationship between the price and the quantity demanded. |
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Term
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Definition
is the value of consuming one unit, or what you are willing to pay for that one
unit. |
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Term
| more to the consumer than they cost. |
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Definition
| MV > P. Buy more. Increase consumption. The goods are worth _______________________________________. |
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Term
| Cost more than they are worth to the consumer. |
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Definition
| MV < P, buy less. Decrease consumption. Then they product ______________________________________. |
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Term
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Definition
holding other relevant factors constant (ceteris paribus), the lower the price of a
good, the greater will be the quantity demanded of that good. (Demand curves are downward sloping). |
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Term
| movement along a given demand curve. |
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Definition
| A change in the “own price” of a good implies a _________________________________. |
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Term
| a shifting of the entire demand curve. |
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Definition
| Any change in one or more of the ceteris paribus conditions above implies _____________________. |
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Term
| ceteris paribus conditions |
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Definition
These are the things that we hold constant
when we are drawing a demand curve. If we change one of these conditions, we have a new demand curve. |
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Term
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Definition
| Good X is called a normal (superior) good if when incomes change, the demand for good X changes in the same direction. This happens with _______________ goods. |
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Term
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Definition
| What kind of good is X if when incomes change, the demand for good X changes in the opposite direction. |
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Term
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Definition
Suppose baseball hats are a normal or superior good. If incomes of consumers were to rise, the demand for
baseball hats would __________ shift to the _________. |
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Term
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Definition
Good X is called _________ good if when incomes change, the demand for good X changes in the opposite
direction. |
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Term
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Definition
Thus, if Mad Dog is an inferior good, an increase in the income of consumers will lead to a _________ in the
demand for Mad Dog. |
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Term
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Definition
A _________ in the income of consumers will lead to an increase in the
demand for Mad Dog. |
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Term
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Definition
Suppose that suddenly oranges were found to cure cancer. This would lead to a(n) ________ in the demand
for oranges. On the other hand, suppose oranges were now made illegal to consume. In this case, the
demand for oranges would ___________. |
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Term
| a movement along a demand curve |
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Definition
a change in own price causes _________________________, and
everything else will shift the entire demand curve. |
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Term
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Definition
| As we __________ the rate of production, the (marginal) cost of production increases. |
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Term
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Definition
| the change in total cost associated with producing one additional unit of output. |
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Term
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Definition
| The principle of rising marginal cost - the _____ the rate of production, the ______ the marginal cost of producing an addition unit of output. |
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Term
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Definition
- firms choose to produce at a rate such that marginal cost is equal to the market
price of the good. |
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Term
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Definition
| A supply curve is the same thing as a ________________. |
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Term
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Definition
| the marginal cost curve turns out to be a ______ curve. |
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Term
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Definition
| Holding other relevant factors constant, (ceteris paribus), the higher the price of a good, the greater will be the quantity supplied. (Supply curves are upward sloping). |
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Term
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Definition
| The 1st Law of Supply simply says that suppliers will want to produce more if they can sell for a ______ price. |
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Term
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Definition
| An increase in an input price causes an increase in the MC of producing, and hence a ______ in supply. |
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Term
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Definition
| A decrease in an input price causes a decrease in the MC of production, and hence will_________ in supply. |
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Term
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Definition
| improvements in technology are defined as cases where marginal costs are ____ due to the _________ change. |
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Term
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Definition
deteriorations in technology are defined as cases where marginal costs are
______ due to the _____. |
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Term
| a supply curve / supply curve |
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Definition
| A change in own price causes a movement along ___________, and everything else will shift the entire _______________. |
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