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| economics came about from |
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| limited nature of societys resources |
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| how society manages its scarce resources (what to produce how to produce etc.) |
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1. people face tradeoffs
2.the cost of something is what you give up to get it
3. rational people think of the margin
4. People respond to incentives
5. trade can make everyone better off
6. markets are usually a good way to organize economic activity
7. governments can sometimes improve market outcomes
8.a country's standard of living depends on its ability to produce goods and services
9. prices rise when the governemnt prints too much money
10. society faces a short run tradeoff between inflation and unemployment |
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| to acheive equality, one must resdistribute goods |
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| whatever must be given up to obtain a good |
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| monetary is synonymous with.. |
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| non monetary is synonymous with |
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| incremental adjustments to an existing plan |
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| instead of being self-sufficient |
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| specialize in one good or service |
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| what to produce how to produce how much and for whom |
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| any arrangement that briings a group of buyers and sellers together |
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| allocates resources through the decentralized deecisions of many households and firms as they interact in markets |
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| interaction of buyers and sellers determine |
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| government can improve outcomes when |
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| the market fails to allocate resources efficiently |
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| when the market fails to allocate society's resources efficiently |
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when the production or consumption of a good affects bystanders
ex. pollution |
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| single buyer or seller has substantion influence on market price |
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| us standard of living is ____ times higher than it was 100 years ago |
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| most important determinants of living standards |
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| productivity, the amount of goods and services produced per unit of labor |
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| equipment, skills, and technology available to workers |
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| in short run economic policies push inflation and unemployment in same or opposite directions? |
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| measures total income of everyone in the economy.total expenditure of the economy's output of goods and services |
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| labor land and capital are... |
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| market value of all final goods and services produced within a country in a given period of time |
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| production of goods and services valued at current prices |
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| production of goods and services at constant prices |
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| Problems iin measuring cost of living |
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Substitution bias
Introduction of new goods
Unmeasured quality change |
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| GDP is not perfect because it does not include |
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| leisure, shadow economy, value of activity oustide of market, or quality of environment |
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measure of the overall cost og goods and services bought by a typical consumer
household survey |
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| measure of the cost of a basket of goods and survices bought by firms |
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| when prices change, households make substututions for the bureau of labor |
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| introduction of new goods. unmeasured quality chagnge, upgrade to signal work |
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| automatic correction by law or contract of a dollar amount for the effects of inflation |
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| cost of living allowance: a partial or complete indexation of the wage to the CPI |
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| Making decisions requires |
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| comparing the costs and benefits of alternative choices. |
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| systematically and purposefully do the best they can to achieve their objectives. Does so by evaluating costs and benefits of marginal changes |
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| When Market Failure occurrs |
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| Government can alter it to promote equity and efficiency |
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goods offerred are exactly the same
therea re numerous buyers and sellers
No single one has any influence over the parket price
Buyers buy all they want
sellers sell all they want |
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| other things equal, when price of goods rises quantity demanded of goods falls |
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| horizantal summation of individual demand curves, totall quantity demanded of a good variesas the price varies |
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| change increasing demand moves |
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| Variables that can shift demand |
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| income, price of related goods, tastes, expectations, number of buyers |
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| regarding demand, when income increases... |
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| demand for normal goods increase and demands for inferior goods decrease |
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| increase in market demand |
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shift=policy discouraging smoking will move curve left
movement-tax raising price of cigs will move the demand point backwards but the curve does not move |
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| all things equal, when price of good rises, quantity supplied rises |
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| Variables that can shift supply curve |
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| input prices (negative relation), technology (supply increase), future expectations affect current supply |
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| government purchases do not include |
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| consumption does not include |
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| reflects prices of all goods and services produced domestically |
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| reflects prices of goods and services bought by consumers |
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GDP affected by domestically and non domestically produced domestic goods,
CPI affected by domestically produced consumer goods and consumer goods produced elsewhere
non consumer goods produced elsewhere have no weight |
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