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Micro
Exam studying
104
Economics
Undergraduate 2
04/14/2010

Additional Economics Flashcards

 


 

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Term
Economics and its two branches?
Definition

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

Term

Opportunity Cost

 

Definition
Highest-valued alternative that we must give up to get something else
Term
Marginal Benefit
Definition
Benefit that arises from an increase in activity
Term
Marginal Cost
Definition
The cost of an increase in an activity.  (Addition night studying is the cost of additional night not with your friends
Term
Product Efficency
Definition
if we produce goods and ervices at the lowest possible cost
Term
Opportunity Cost
Definition
is an action with the highest-valued alternative forgone. Can only produce more pizza if produce less pop
Term
Allocative Efficiency
Definition
When goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit
Term
Marginal cost
Definition
Marginal cost of a good is the opportunitry cost of producing one more unit of it. More pizzas PPF steeper, Marginal Cost increase
Term
Marginal Benefit
Definition
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
Term
Marginal Benefit Curve
Definition
is a curve that shows the relationship between the marginal benefit from a good and the quantity consumed of that good.
Term
Economic Growth
Definition
production per person doubles. Increases Standard of living; but doesn't overcome scarcity and doesn't avoid Opp. cost.
Term
Comparative Advantage
Definition
A person has a comparative advantage in an activity if that person can perform the activity at a lower opportunity cost than anyone else
Term
Absolute Advantage
Definition
A person who is more productive than others.
Term
Firm
Definition
A firm is an economic unit that hires factors of production and organizes those factors to produce and sell goods and services.
Term
Market
Definition
a Market is any arrangement that enables buyers and sellers to get information and to do business with each other
Term
Money
Definition
Money is any commodity or token that is generally acceptable as a means of payment.
Term
Competative Market
Definition
A market which has many buyers and sellers, so no single buyter or seller can influnce the price
Term
Relative Price
Definition
The ratio of one price to another. A relative price is an opportunity cost.
Term
Quantity Demanded
Definition
of a good or service is the amount that consumers plan to buy during a given time period at a particular price.
Term
Demand
Definition
refers to the entire relationship between the prpice of a good and the quantity demanded for that good
Term
Quantity supplied
Definition
of a good or service is the amount that producers plan to sell during a given time period at a particular price
Term
Supply Curve
Definition
refers to the entire relationship between the price of a good and the quantity supplied of it.
Term
Equilibrium Price
Definition
is the price at which the quantity demanded equals the quantity supplied
Term
Equilibrium quantity
Definition
is the quantity bought and sold at the equilibrium price.
Term
Price of Elasticity of Demand
Definition
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
Term
Price elasticity of demand equation
Definition

Change in quant/ average

divided by

Change in price/ av price

Term
Perfect inelastic Demand
Definition
if the quantity demanded remains constant when the price changes then the price elasticity of demand is zero
Term
Unit elastic demand
Definition
if the percentage change in the quantity demanded equals the percentage change in the price then the price elasticity equals 1
Term
Inelastic demand
Definition
the percentage change in the quantity demanded is less then the percentage change in the price.
Term
Total revenue
Definition
The total revenue from the sale of a good equals the price of the good multiplied by the quantity sold. PricexQuantity
Term
Cross Elasticity of Demand
Definition

Price Change in Quant demanded/

Percentage Change in price of a substitue ofr complement

Term
Income elasticity of demand
Definition

Percentage Change in quant demanded/

Percentage change in income

Term
Elasticity of Supply Equation
Definition

Percentage Change in quant supply/

Percentage change in price

Term
Consumer Surplus
Definition

Value - Price

Don't always have to pay what you are willing to. Bargain

Term
Marginal Cost
Definition
the cost of producing one more unit of a good or service
Term
Producer Surplus
Definition

When Price exceeds marginal cost

Price recieved- minimum supply cost

Term
Utilitarianism
Definition
is a principle that states that we should strive to achieve the greatest happiness for the greatest number
Term
Price Ceiling or Price Cap
Definition
a government regulation that makes it illegal to charge a price higher than a specified level 
Term
Rent Ceiling
Definition
When a Price ceiling is applied to housing, aka you can not charge over what the government makes the top selling price
Term
Black Market
Definition

encouraged by rent ceilings,

and illegal market in which the equilibrium price exceeds the price ceiling 

Term
Price floor
Definition
a government-imposed regulation that makes it illegal to charge a price lower than a specified level
Term
Tax incident 
Definition
is the division of the burden of tax between buyers and sellers. 
Term
Production Quota
Definition
Is an upper limit to the quantity of a good that may be produced in a specified period. 
Term
Production Quota set below equilibrium causes...
Definition

Decrease in supply

Rise in Price

Decrease in marginal cost

an incentive to cheat and over produce (black market)

Term
Subsidy and its effects
Definition
Payment made by the government to a producer.  Increase in supply, fall in price, increase in quant produced, increase marginal cost, Inefficient over production 
Term
Tariffs
Definition
a tariff is a tax on a good that is imposed by the importing country when an imported good crosses its international boundary 
Term
Import Quota
Definition
is a restriction that limits the maximum quantity of a good that may be imported in a given period 
Term
Whats the difference between a tariff and a quota?
Definition
tariff brings revenue to the government where are quota brings revenue to the importers. 
Term
Rent seeking
Definition

(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

Term
Utility and what are its  two subsections? 
Definition
the benefit of satisfaction that a person gets from the consumption of goods and services. Total Utility and Marginal Utility
Term
Total Utility
Definition
is the total benefit that a person gets from the consumption of all the different goods and services. More consumption More utility
Term
Marginal Utility
Definition
is the change in the total utility that results from one-unit increase in the quantity of goods consumed 
Term
diminishing marginal utility
Definition
decrease as the consumption of the good increases 
Term
Consumer equilibrium 
Definition
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
Term
Behavioural Economics
Definition
Studies the ways in which limits on the human brain's ability to compute and implement rational decisions influences economic behavour. 
Term
Neuroeconomics
Definition
is the study of the activity of the human brain when a person makes an economic decision 
Term
Budget line
Definition

A household's budget line describes the limits to its consumption choices.

Expenditure = income 

Term
Budget Line Equation 
Definition

(Price of Commodity1 x Quantity of Commodity1) +

(Price of Commodity2 x Quantity of Commodity 2) = Y (Income) 

Term
Real Income
Definition
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
Term
Relative Price 
Definition
Price of one good divided by the price of another good. Such as Pp/ Pm
Term
Indifference Curve
Definition
is a line that shows combination of goods among which a consumer is indifferent Boundary between preferred and not preferred
Term
Marginal role of substitution (MRS) 
Definition
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
Term
A diminishing marginal rate of substitution 
Definition
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. 
Term
Close substitutes 
Definition
some goods substitute so easily for each other that most of us don't even notice what we are consuming. Example brands of pens
Term
Complements
Definition
some goods do not substitute. They are just complements, example..left and right running shoes
Term
Price Effect
Definition
The effect of a change in the price on the quantity of a good consumed. 
Term
Substitution Effect
Definition
is the effect of a change in price on the quantity bought when the consumer remains indifferent between the original sit and new one 
Term
Economic Profit
Definition
is equal to total revenue minus total cost, with total cost measured as the opportunity cost of production 
Term
Implicit Rental Rate and its two subgroups 
Definition
the firm's opportunity cost of using the capital it owns. It has two components, Economic depreciation and forgone interest. 
Term
Economic Depreciation
Definition
accountants measure depreciation, the fall in the value of the firm's capital. The FALL in MARKET VALUE
Term
Forgone Interest 
Definition
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
Term
Technology efficiency 
Definition
occurs when the firm produces a given output by using the least amount of inputs
Term
Economic efficiency 
Definition
occurs when the firm produces a given output at the least cost 
Term
Command system
Definition
is a method of organizing production that uses a managerial hierarchy. Commands passed down information passed up
Term
Incentive system
Definition
is a method of organizing production that uses a market-like mechanism inside a firm. Compensation to work harder 
Term
Principal-agent problem
Definition
is the problem of devising compensation rules that induce an agent to act in the best interest of a principal 
Term
*Perfect Competition * Written Question 
Definition
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 
Term
Monopolistic Competition 
Definition
is a market structure in which a large number of firms compete by making similar but slightly different products 
Term
Oligopoly 
Definition
is a market structure in which a small number of firms compete. Example- computer software, coke and pepsi
Term
Monopoly
Definition
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 
Term
Four- firm concentration Ratio 
Definition
is the percentage of the value of sales accounted for by the four largest firms in an industry. 
Term
Herfindahl- Hirschman Index
Definition
also called HHI- is the square of the percentage market share of each firm summed over the largest 50 firms in a market 
Term
Transaction Costs
Definition
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
Term
Economies of Scale
Definition
when the cost of producing a unit of a good falls as its output rate increases, economies at scale exists Add people
Term
Economies of Scope 
Definition
when a firm uses specialized resources to produce a range of goods and services. Example Toshiba making a hard-drive for IPOD 
Term
Short Run
Definition
is a time frame in which the quantity of at least one factor of production is fixed . 
Term
Long Run
Definition
is a time frame in which the quantities of all factors of production can be varied. 
Term
Total Production 
Definition
is the maximum output that a given quantity of labour can produce. 
Term
Marginal Product
Definition
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" 
Term
Average Product
Definition
the Average product of labour is equal to the total product divided by the quantity of labour employed. Total Product/Quant Labour
Term
Diminishing Marginal Returns
Definition
occurs when the marginal product of an additional worker is less than the marginal product of a previous worker
Term
Total Cost (Short Run)
Definition
(TC) is the cost of all the factors of production it uses. 
Term
Total Fixed Cost
Definition
is the cost of the firm's fixed factors. For sweater production includes the use of sewing machines
Term
Total variable Cost
Definition
is the cost of the firm's variable factors. For producing sweaters, labour is a variable factor
Term
The long run average cost curve
Definition
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
Term
Price Taker
Definition
is a firm that cannot influence the market price because its production is an insignificant part to the total market 
Term
Regulation
Definition
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 
Term
Externality
Definition
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
Term
Negative externality
Definition
imposes a cost 
Term
positive externality
Definition
provides a benefit
Term
Market Income
Definition
equals the wages, interest rate 
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