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| Economics and its two branches? |
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the social science that studies the choices that individuals, businesses, governments and entire societes make as they cope with scarcities and incetives.
Macroecon and Microecon |
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| Highest-valued alternative that we must give up to get something else |
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| Benefit that arises from an increase in activity |
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| The cost of an increase in an activity. (Addition night studying is the cost of additional night not with your friends |
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| if we produce goods and ervices at the lowest possible cost |
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| is an action with the highest-valued alternative forgone. Can only produce more pizza if produce less pop |
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| When goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit |
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| Marginal cost of a good is the opportunitry cost of producing one more unit of it. More pizzas PPF steeper, Marginal Cost increase |
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| The marginal benefit from a goodor service is the benefit received from consuming one more unit of it. Measure by how much one is willing to pay for a certain commodity |
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| is a curve that shows the relationship between the marginal benefit from a good and the quantity consumed of that good. |
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| production per person doubles. Increases Standard of living; but doesn't overcome scarcity and doesn't avoid Opp. cost. |
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| A person has a comparative advantage in an activity if that person can perform the activity at a lower opportunity cost than anyone else |
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| A person who is more productive than others. |
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| A firm is an economic unit that hires factors of production and organizes those factors to produce and sell goods and services. |
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| a Market is any arrangement that enables buyers and sellers to get information and to do business with each other |
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| Money is any commodity or token that is generally acceptable as a means of payment. |
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| A market which has many buyers and sellers, so no single buyter or seller can influnce the price |
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| The ratio of one price to another. A relative price is an opportunity cost. |
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| of a good or service is the amount that consumers plan to buy during a given time period at a particular price. |
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| refers to the entire relationship between the prpice of a good and the quantity demanded for that good |
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| of a good or service is the amount that producers plan to sell during a given time period at a particular price |
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| refers to the entire relationship between the price of a good and the quantity supplied of it. |
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| is the price at which the quantity demanded equals the quantity supplied |
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| is the quantity bought and sold at the equilibrium price. |
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| Price of Elasticity of Demand |
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| is a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same |
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| Price elasticity of demand equation |
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Change in quant/ average
divided by
Change in price/ av price |
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| if the quantity demanded remains constant when the price changes then the price elasticity of demand is zero |
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| if the percentage change in the quantity demanded equals the percentage change in the price then the price elasticity equals 1 |
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| the percentage change in the quantity demanded is less then the percentage change in the price. |
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| The total revenue from the sale of a good equals the price of the good multiplied by the quantity sold. PricexQuantity |
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| Cross Elasticity of Demand |
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Price Change in Quant demanded/
Percentage Change in price of a substitue ofr complement |
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| Income elasticity of demand |
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Definition
Percentage Change in quant demanded/
Percentage change in income |
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| Elasticity of Supply Equation |
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Percentage Change in quant supply/
Percentage change in price |
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Value - Price
Don't always have to pay what you are willing to. Bargain |
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| the cost of producing one more unit of a good or service |
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When Price exceeds marginal cost
Price recieved- minimum supply cost |
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| is a principle that states that we should strive to achieve the greatest happiness for the greatest number |
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| Price Ceiling or Price Cap |
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| a government regulation that makes it illegal to charge a price higher than a specified level |
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| When a Price ceiling is applied to housing, aka you can not charge over what the government makes the top selling price |
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encouraged by rent ceilings,
and illegal market in which the equilibrium price exceeds the price ceiling |
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| a government-imposed regulation that makes it illegal to charge a price lower than a specified level |
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| is the division of the burden of tax between buyers and sellers. |
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| Is an upper limit to the quantity of a good that may be produced in a specified period. |
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| Production Quota set below equilibrium causes... |
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Decrease in supply
Rise in Price
Decrease in marginal cost
an incentive to cheat and over produce (black market) |
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| Payment made by the government to a producer. Increase in supply, fall in price, increase in quant produced, increase marginal cost, Inefficient over production |
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| a tariff is a tax on a good that is imposed by the importing country when an imported good crosses its international boundary |
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| is a restriction that limits the maximum quantity of a good that may be imported in a given period |
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| Whats the difference between a tariff and a quota? |
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| tariff brings revenue to the government where are quota brings revenue to the importers. |
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(major reason why international trade is sometimes restircted. )
It is the lobbying for special treatment by the government to create economic profit to divert consumer surplus or producer surplus away from others |
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| Utility and what are its two subsections? |
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| the benefit of satisfaction that a person gets from the consumption of goods and services. Total Utility and Marginal Utility |
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| is the total benefit that a person gets from the consumption of all the different goods and services. More consumption More utility |
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| is the change in the total utility that results from one-unit increase in the quantity of goods consumed |
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| diminishing marginal utility |
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| decrease as the consumption of the good increases |
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| is a situation in which a consumer has allocated all of his or her available income in the way that maximizes his or her total utility, given the prices of goods and services |
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| Studies the ways in which limits on the human brain's ability to compute and implement rational decisions influences economic behavour. |
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| is the study of the activity of the human brain when a person makes an economic decision |
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A household's budget line describes the limits to its consumption choices.
Expenditure = income |
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(Price of Commodity1 x Quantity of Commodity1) +
(Price of Commodity2 x Quantity of Commodity 2) = Y (Income) |
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| A household's real income is its income expressed as a quantity of goods that the household can afford to buy. Income/Price of good |
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| Price of one good divided by the price of another good. Such as Pp/ Pm |
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| is a line that shows combination of goods among which a consumer is indifferent Boundary between preferred and not preferred |
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| Marginal role of substitution (MRS) |
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| is the rate at which a person will give up a good (y-axis)to get a good on the (x-axis) while remaining indifferent |
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| A diminishing marginal rate of substitution |
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| is a general tendency for a person to be willing to give up less of good y to get one more unit of good x, at the same time remaining indifferent if the quantity of x increases. |
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| some goods substitute so easily for each other that most of us don't even notice what we are consuming. Example brands of pens |
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| some goods do not substitute. They are just complements, example..left and right running shoes |
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| The effect of a change in the price on the quantity of a good consumed. |
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| is the effect of a change in price on the quantity bought when the consumer remains indifferent between the original sit and new one |
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| is equal to total revenue minus total cost, with total cost measured as the opportunity cost of production |
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| Implicit Rental Rate and its two subgroups |
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| the firm's opportunity cost of using the capital it owns. It has two components, Economic depreciation and forgone interest. |
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| accountants measure depreciation, the fall in the value of the firm's capital. The FALL in MARKET VALUE |
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| the funds used to buy capital could have been used for some other purpose, and in their next best use, they would have earned interest |
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| occurs when the firm produces a given output by using the least amount of inputs |
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| occurs when the firm produces a given output at the least cost |
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| is a method of organizing production that uses a managerial hierarchy. Commands passed down information passed up |
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| is a method of organizing production that uses a market-like mechanism inside a firm. Compensation to work harder |
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| is the problem of devising compensation rules that induce an agent to act in the best interest of a principal |
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| *Perfect Competition * Written Question |
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| arises when there are many firms, each selling an identical product, many buyers, and no restrictions on the entry of new firms into the industry. Examples: worldwide markets for corn, rice and other grain crops |
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| is a market structure in which a large number of firms compete by making similar but slightly different products |
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| is a market structure in which a small number of firms compete. Example- computer software, coke and pepsi |
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| is a market structure in which there is only one firm and it produces a good or service that has no close substitutes and the firm is protected by a law that does not allow close substitutes |
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| Four- firm concentration Ratio |
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| is the percentage of the value of sales accounted for by the four largest firms in an industry. |
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| Herfindahl- Hirschman Index |
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| also called HHI- is the square of the percentage market share of each firm summed over the largest 50 firms in a market |
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| are costs that arise from finding someone with whom to do business, of reaching an agreement about the price and other aspects of the exchange, and of ensuring that the terms of agreement are fulfilled |
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| when the cost of producing a unit of a good falls as its output rate increases, economies at scale exists Add people |
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| when a firm uses specialized resources to produce a range of goods and services. Example Toshiba making a hard-drive for IPOD |
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| is a time frame in which the quantity of at least one factor of production is fixed . |
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| is a time frame in which the quantities of all factors of production can be varied. |
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| is the maximum output that a given quantity of labour can produce. |
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| marginal product of labour is the increase in total product (amount of good) that results from a one-unit increase in the quantity of labour employed (workers) other outputs remaining the same. "Product increase due to labourer" |
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| the Average product of labour is equal to the total product divided by the quantity of labour employed. Total Product/Quant Labour |
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| Diminishing Marginal Returns |
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| occurs when the marginal product of an additional worker is less than the marginal product of a previous worker |
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| (TC) is the cost of all the factors of production it uses. |
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| is the cost of the firm's fixed factors. For sweater production includes the use of sewing machines |
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| is the cost of the firm's variable factors. For producing sweaters, labour is a variable factor |
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| The long run average cost curve |
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| is the relationship between the lowest attainable average total cost and output when the firm can change both the plant it uses and the quantity of th labour it employes |
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| is a firm that cannot influence the market price because its production is an insignificant part to the total market |
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| rules administered by a government agency to influence prices, quantities, entry and other aspects of economic activity in a firm or industry- is a possible solution to this dilemma |
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| a cost or benefit that arises from production and falls on someone other then the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer |
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| equals the wages, interest rate |
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