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Definition
| analyze human behavior, understand human choices |
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| who wrote wealth of the nations & invisible hand, economics originated |
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| trade off one for another; value of the best thing you miss out on is the ___________ |
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| next best alternative, a job: |
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Definition
| the opportunity cost of going to college would be __________ for example; a ______. |
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| rises, cost rises too. give up high salary for college, cost of choosing college rises |
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Definition
| as the salary of a job ________; the opportunity cost of attending college instead, _______. |
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| theres no such thing as a free lunch |
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Definition
| because of scarcity, there will always be an opportunity cost. always give up time for something that u could do another... known as " " |
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| theres no such thing as a free lunch |
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Definition
| statement means: opportunity cost is ALWAYS present when scare resources are used to produce a good |
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| people choose purposely, we will max our happy at min cost. all economic is subjective. |
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| charlie is being _________ in economist eyes if he quits a job for 2 million because he rather travel. but will take it for 3, therefore travel is not as important to him as 3 million |
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Definition
| as these go up you will be more willing to do something, as they go down u are less willing |
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| individuals think on the margin |
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Definition
| people think about the additional (marginal) benefit vs additional (marginal) cost before deciding.EX: 420 cici's pizza buffet. after 4 plates, u stop. 1st plate cost, 4th didnt, sick is not worth 0 loss of not paying for 5th plate |
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| Only _______ cost should be calculated in cost of going to college, not full cost of room and food. |
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| more _________ leads to better choices but increases cost |
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| effect of the future, not just direct effects. ex. fuel efficient cars are lighter vehicles, but in future more fatal accidents occur |
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| one person may have high value for 40 when another spends 40 everyday on beer.... example off _________ |
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| average individual would do |
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| economist try to see what a _______ person would to because this is most known/accurately happening. |
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| based on facts, can be proven |
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| "other things constant" try to keep all aspects the same and focus on one item. ex. focus on only coach of team in change and not other team, weather, offense, defense |
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| good intentions dont always mean good outcomes |
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Definition
| sometimes, primary effects are good but second are bad. ex) kids seatbelts on airplanes? seems good but makes more $$ and then ppl just drive where there are many more accidents. ex that.... |
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| cause....association not causation |
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Definition
| just because two things are associated does not mean they _________ each other. |
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| Fallacy of ____________ = what is good for 1 might not be good for all. Ex. all get 3-4-1 at pots at 9pm... good for me, if everyone does FML hour to get a drink |
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Definition
| ___________ trade creates value to both parties otherwise they wouldnt do it |
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| increases the gains from trade, by reducing transaction costs. ex. i wont go to canada for a beer, publix provides it for me. :) they are the ________ |
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Definition
| if one person gains in a trade, other other must lose??? t / f |
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| david values his car 9,000 & stacy values it at 12,000. Stacy pays 10,000... therefore they each gain what?? |
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| allow the right to exclusive use, the right to protect & the right to transfer or sell something |
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| allow many ppl to claim ownership rights. ex. lake, park, highway |
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| important because create incentive to take care of your own and public things |
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Definition
| give high incentive to take care of and control if held responsible for inflicting on others. EX. i own an elephant vs. gov. owned elephant. Mine will get better care from me |
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Definition
| population of elephants governemnt owned will ________ while population of private owned elephants will ________ |
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Term
| Production Possibility Curve |
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Definition
| shows maximum combinations of two goods that can be produced from a set of fixed resources. |
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| PPC production possibility curve |
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Definition
| opportunity cost is constant in curve, to get more of one good, must give up another. EX, 20 oz weed for 40 pizzas |
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Definition
| cost increases as u move to edges of this curve because resources are used less efficiently. |
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Definition
| on a Production Possibility Curve, PPC you can only produce more of one good if you produce _____ of the other |
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Definition
| a technological advance that increases output with the same amount of inputs would be represented by _________ on PPC curve |
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| BOTH, inside curve/efficient |
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Definition
| if the resources of the economy are being used inefficiently, then the production of ______ could be increased. |
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Definition
| the PPC is usually bowed ______ because, some resources are better to make beer and others better to make pizza. |
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Term
| law of increasing opportunity cost |
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Definition
| PPC bowed out because law ________ __ ______ _______, aka: cost to produce more pizza=giving up more pot |
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Definition
| what if it cost 10 pizza = 10 ounces pot to make, what would the line look like? |
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Definition
| if opportunity cost was decreasing.... the PPC would |
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Definition
| increase in resources, improving technology, improving laws to more efficient, harder work ... all make the PPC curve.... |
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Definition
| encouraging business investment with tax cuts makes the PPC.... |
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Term
| specialization / division of labor |
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Definition
| one person doesnt build a whole car, someone good at something does that and an assembly line maximizes output |
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Term
| law of comparative advantage , LOW |
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Definition
| law? to max output, individuals should produce the good for which they have _______ opportunity cost. |
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Definition
| usually achieved due to availability of natural resources |
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Term
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Definition
| law of comparative advantage states, ppl should trade for those economic goods for which it is a ______ opportunity cost producer. |
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| why opportunity cost differ among nations |
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Definition
| differences in land & labor, differences in capital & technology |
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Term
jim has a comparative advantage in WASH
jack has a comparative advantage in WAX |
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Definition
jim can wash 10 cars or wax 5 in hr
jack can wash 6 cars or wax 10 in hr
who should do what?? |
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Term
| change in Quantity Demanded |
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Definition
| a movement ALONG the curve. caused ONLY BY PRICE of that good. |
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Definition
| an increase in price of Whiskey will __________ the quantity demanded of Whiskey? |
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Definition
| Increase in the price of Mom's Hot Dogs will decrease the ___________ for their hot dogs |
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Definition
| When quantity demanded decreases, the price of the product has ___________ |
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| a shift of the ENTIRE curve, caused by anything other than price |
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Definition
| decease in consumer income will shift demand to the _____ |
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| _______ in consumer income will shift demand to the right |
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| an increase in the ___________ will shift demand to the right |
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| a decrease in the ________________ will shift demand to the left |
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Definition
| as bud light increases in price, ppl will buy more miller light because it is a __________ |
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Definition
| miller light $ ^^, ppl by MORE bud light. therefore the price of bud light will increase because demand __________ |
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Definition
| two goods are __________.... if increase in price of first leads to increase in demand for the second |
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Term
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Definition
| substitutes if an ______ in demand for first leads to a __________ in demand for the 2nd |
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Definition
| as price of pot increases, demand for taco bell will decrease because they are __________ |
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Definition
| an increase in the price of burgers will do what to the demand for buns? (complement good) |
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Definition
| if future price is expected to be higher, demand shifts.... |
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Definition
| if ___________ are expected to be lower, demand shifts to the left |
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Definition
| large number of old ppl will ___________ the demand for nursing homes. |
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| change and offer more healthy stuff, consumer taste |
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Definition
| when ppl become more cautious, ex. ppl more healthy means McD's must.... |
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Definition
| demand for product has increased means.... |
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Term
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Definition
| eco say quantity demanded for a prodcut has decreased... this means... |
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| downward move ALONG demand curve |
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Definition
| decrease in price of good = what for demand curve? |
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Definition
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| decrease in demand for SUV.... not demand for gas cuz its PRICE |
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Definition
| increase in price of gas ? means... |
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| quantity supplied, move along curve |
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Definition
| what happens to qty supplied ? demand decreases = qty supplied __________ |
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| change in quantity Supplied |
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Definition
| movement along the supply curve, only caused by PRICE of good |
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Term
increases
(because demand is down, supply is up) |
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Definition
| increase in price of beer does what to qty supplied? |
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Definition
increase in price of weed will increase ______?
aka:
(demand decreases & supply ____) |
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Term
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Definition
| price change = _______ suppply change |
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Definition
| shift of the ENTIRE supply, factors other than price of supply (change in resource price, change in tax, change in technology, weather) |
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Definition
| resources supply prices increase, supply curve will shift ______ because costs have risen |
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Definition
| as resource (input) price decreases, supply will shfit _______ because costs have fallen |
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| price increase & quantity supplied decrease |
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Definition
| change in supply = what will increase price of cotton do to t shirtts? |
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Term
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Definition
| as _________ gains are made, supply will increase since costs will be driven down |
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Definition
| an increase in _____ on a supplier raises their costs. an increase in costs reduces supply |
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Definition
| a ________ in tax on a supplier lowers costs, & a decrease in costs increases supply |
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Definition
| group of buyers & sellers of a particular good or service |
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Definition
| ________ made where supply & demand curves intersect. |
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| qty supplied = qty demanded |
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Definition
| self interest individuals will produce what is valued by society at the most w/o direction from the government... |
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Term
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Definition
| a __________ market drives the invisible hand theory |
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Definition
| gov. stay the fuck out of our lives, free market!! |
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Definition
| there will be MORE of a change in amount purchased as price changes. "bigger change in qty demanded" |
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Definition
| there will be LESS of a change in amount purchased when price changes. "smaller change in qty demanded" |
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Definition
| if a large % increase in the price of a good results in small % reduction in qty demanded, demand is __________ |
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Term
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Definition
| if small % increase in the price results in large % reduction of the qty demanded the demand is |
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Term
| price elasticity of demand |
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Definition
| absolute value of (% change in qty demanded) divided by (% change in price) |
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Definition
| if price elasticity is ____ demand is Elastic |
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Definition
| if price elasticity of demand is < 1 demand is _____ |
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Definition
| price elasticity of demand for Coc is .60 so it is |
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Definition
| PED for coc is .60 and PED for natty is 1.2 therefore demand for natty is more ______ than demand for coc |
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Definition
| price of tickets increases 10% and attendance decreases 5%, then demand is?? |
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Term
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Definition
| the _____ subs, the ______ elastic the demand. if the price of one good rises, the consumera will have the option to buy a cheaper sub. |
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Definition
| most important aspect of price elasticity demands |
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Term
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Definition
| if the price of a good is higher % of your income, youre demand will be ____ elastic |
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Definition
| price elasticity of demand is high, the price of a good must be ______% of ur income |
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Definition
| the less time available, the _______ elastic the demand. Ex. as date gets closer, flyers are less elastic. aka:they are willing to pay |
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Definition
| ____________ = total revenue – total out-of-pocket costs |
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Definition
| ________________ = total revenue – total out-of-pocket costs – opportunity costs |
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| ___________– a period of time in which at least one input is fixed |
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| – a period of time in which all inputs are variable; i.e. none of the inputs are fixed |
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Definition
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| Marginal Cost falls because... |
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Definition
(1) Increasing marginal returns- each additional input adds more to total output than the previous input
(2) learning by doing |
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Definition
_________ because of diminishing marginal returns At some point, each additional input adds less to total output than the previous input
Since more and more input is required, marginal cost rises rapidly |
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Definition
Because in order to produce larger quantities, the firm will need to “get bigger.” That is, they will need to increase their capital.
These are typically expensive so capital costs become large which ________ LRATC. |
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Term
| high costs shift curves UP because: |
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Definition
Resources become more expensive
Higher taxes
More, or stricter, regulations
Older technology |
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| lower costs shift curves down: |
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Definition
Resources become less expensive
Lower taxes
Less regulation
Newer technology |
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Definition
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Definition
____ _ _____ means the benefit is getting bigger (ATC is falling)
Also referred to as Increasing Returns to Scale |
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Definition
| _______ ___ ______ means the benefit is negative (ATC is rising) Also referred to as Decreasing Returns to Scale |
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Definition
| In the ______ Run, diminishing returns determine the shape of the cost curves |
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Definition
| In the _____ run, economies of scale determine the shape of the cost curves |
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Definition
| indicate the desire of consumers for other goods that might have been produced with same resources |
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Definition
| the ATC curve is ______, because ATC is high at lower levels of production because AFC is high. (qty low, AFC high) |
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Definition
| ATC is curved shape because ATC is high at larger levels of production because MC is _____. (diminishing marginal returns) |
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Definition
| MC curve is _________ because marginal cost & marginal production move in opposite directions. |
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Definition
| when marginal product of labor decreases, diminishing returns, marginal cost _______ |
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| law of diminishing returns |
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Definition
| implies that expansion in output will lead to rise in marginal cost & a rise in ATC |
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| the min point of the ATC curve occurs where it intersects the __________ |
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| marginal cost curve tells ______ what to do |
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| min point of the AVC curve occurs where it intersects the |
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| Average always follows the _____ |
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Definition
| marginal is greater than average.... average will.... |
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| difference, distance between ATC & AVC is... |
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Definition
| AFC ______ with increase in output |
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Definition
| difference between ATC & AVC curves will decline as production |
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Definition
| diminishing returns, marginal product determines the curve in the _________ run |
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Definition
| increase in resources prices will shift cost curve.... |
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Definition
| decrease in resources price will shift cost curve... |
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Definition
| increase in taxes on seller will shift cost curve _____ and decrease will shift cost curve _____. |
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Definition
| increase in regulation shift cost curve ______ and decrease shift it ______ |
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Definition
| increase in technology will shift cost curve ______ . Ex:computers taking over jobs for 3999 ppl |
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Definition
| historical costs of past decisions that cant be recovered. not relevant when making future and current decisions |
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Definition
| most relevant cost in short run |
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Definition
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Definition
| upper limit on prices, set below equilibrium to be effective... create SHORTAGE. ex rent control |
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Definition
| lower limit on price, must be set above EQ to be effective. SURPLUS... min. wage example |
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| demanded / supplied / shortage |
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Definition
| price ceiling set below EQ causes imbalance because qty ______ exceeds qty _______ but price cant go past ceiling to remove ________. |
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| supplied / demanded / surplus |
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Definition
| price floor set above EQ causes imbalances because qty _______ exceeds qty ______ but price cant fall to remove the ______ |
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Definition
| which party responsible for paying the tax. |
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Definition
| actual amount of tax paid by consumer & producer. |
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Definition
| if 3,000 tax statutorily on buyers of new cars, as result price of car decreases 1,000 then actual incidence tax is _______ on sellers and ______ on consumers. |
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Definition
| tax legally on sellers shift the .... |
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Definition
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| supply & demand elasticities |
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Definition
| determine how tax burden is shared. |
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Definition
| demand more inelastic than supply = burden on |
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Definition
| supply more inelastic than demand, burden fallls on |
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Definition
| tax on DVDS , if sellers bear most of the tax then supply is more ____ than demand |
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Definition
| shows relationship between tax rate & tax revenue, usually lower tax rate gives most tax revenue |
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Definition
| payment to the buyer or seller of a good or service, usually on a per unit basis |
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Definition
| ex. 8000 first home buyers credit would be what? |
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Definition
| the more ______ group benefits from a subsidy. EX. demand for gas is inelastic while supply elastic. therefore consumers, will benefit more from subsidy. |
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| distort invcentives and create secondary effects |
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Definition
| problems with subsidies & taxes |
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Definition
The largest net benefit is achieved
Rule: Engage in an activity so long as marginal benefit is greater than marginal cost |
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| 4 reasons why market my produce inefficient outcome |
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Definition
Four reasons why the market may produce an_______ _________:
(1) A lack of competition
(2) Poor information
(3) Public goods
(4) Externalities |
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Definition
| If there are only a few firms, then supply may be restricted which will lower the quantity available and raise price |
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Definition
| results in poor decision making |
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Definition
two distinguishing characteristics:
(1) Many people can consume the good simultaneously; referred to as joint consumption or non-rival
(2) People who don’t pay for the good can still consume it; referred to as non-excludable |
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| existence of public good - inefficient |
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Definition
Because of its characteristics, it will be hard to generate funds to pay for its production
Individuals have a strong incentive to free ride – not pay, wait for someone else to pay, then consume the good
This typically leads to underproduction of public goods; i.e. an inefficient amount being produced |
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Term
| externalities cause inefficiencies |
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Definition
Not all costs and benefits will be used in decision making (external costs and benefits are typically ignored)
With an external cost, too many units are produced and price is too low
With an external benefit, too few units are produced and price is too low |
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| false, radio stations... just my lack amount |
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Definition
| because a good is public markets will fail to provide it? |
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Definition
| COST imposed on me that im not involved in directly. ex 2nd hand smoke |
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| overproduced and under priced |
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Definition
| goods with neg. externalities are.... |
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Definition
| good is nonrival & non excludable |
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Definition
| With an external _______, too few units are produced and price is too low |
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Definition
| benefit accured to me for no action. Ex. Flu shot, less ppl have it, less chance ill get it |
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Definition
| goods with _________ are underproduced & underpriced |
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Definition
| consumption generates external benefit, market demand curve _____ total benefite and too ______ produced & consumed |
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Definition
| firm is small to market, ex corn farmer, sell same product, corn, many buyers, green giant, orville, no barriers to entry/exit.... what kind of market? |
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Definition
| can sell all output at market price but cant sell at higher price |
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Definition
| if a firm can cover variable costs.... P>AVC or MR>AVC or TR>TVC it will... |
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| firm will stay open and decide how much to produce |
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Definition
| if MR (benefit) is > marginal cost... |
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Definition
| when marginal cost of firm is more than market price of product the firm should _____ output |
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Definition
| when ______ in a competitive market, indicates consumers value goods more than the resources used to make it. EX i value my car more than things used to make it |
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Definition
| ____ occur when consumers value good less than resources used to make good |
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| price searcher market w/low entry barrier.... also called monopolistic |
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Definition
Many sellers
Low entry barriers
Sell differentiated but similar products |
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Definition
if.....
MR < AVC, or
TR < TVC
firm should... |
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Definition
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Term
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Definition
| in price searcher market there is no ______ supply or demand curve. Only a firm supply & demand curve. |
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| increase price & decrease output... |
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Definition
| if marginal cost exceeds MR, in competitive price-searcher, firm should ________ price and _____ output |
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| increase price and decrease output |
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Definition
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Definition
| if firms are earning profit in price searcher, new firms will ______ and market price will _____ |
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Definition
| losses occur in competitive price searcher market? firms will _____ and market price will _____ |
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Definition
| when a competitive price-searcher market is in long-run EQ, firms will charge price = _____ |
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Definition
| in the ________ neither price takers or searchers will earn economic profit because competition forces price down to production cost |
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Term
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Definition
| makes decisions based upon uncertainty, discovery, and business judgement. discover new products & services |
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Definition
| compared to outcome when firms are price takers, price searcher markets will result in _____ variety of product & ______ prices |
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Definition
| more variety & higher prices |
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Definition
| selling same good two 2+ groups at different prices. must have down slope demand, seperate customers & prevent from re-trade |
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Term
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Definition
| price discrimination means charge _______ prices to those with most INelastic demand and charge ______ prices to those with most ELastic demand. |
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Definition
| single sellers, no good subs, high entry barrier. ex. 1st class mail |
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Definition
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Term
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Definition
| why is it cheaper for Wendys to make a burger than Chilis?? focus on main output means cheper... |
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Definition
| able to charge more, high barriers create this, why MAC can charger so much ore |
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Definition
| because monopolies are protected by high barriers they may.... |
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Definition
| 3/4 firms control all. ex. cereal/cars. some want to cheat after agreeing, depend on eachother |
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Definition
maybe compet firm = take price
monopolist = FU all & charge more
switch between two |
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Definition
| incentive to cheat to max profit, use coupons, rebates ex |
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| high entry barrier markets |
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Definition
defects of markets with ________: lower output & higher price / shift supply left
some gains from trade not realized
variety lower |
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Definition
| over time, product produced by 3 or so firms selling same product, expect a ______ in output & ______ in price |
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Definition
| if Marginal Product increases, then Marginal Revenue Product increases. If i make better sales, i get paid more |
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Definition
| additional revenue provided from add work production |
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Definition
| additional revenue provided from the additional workers production |
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Definition
| _____ of higher productivity workers is lower, on a graph |
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Definition
prefernces, happiness, race & gender,
high risk job = better pay
poor location = better pay
bad factors/pollution = better pay |
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Definition
| supply of higher workers is ________ on a graph |
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Definition
| increase in international trade with countries where supply of unskilled labor is plentiful would ______ the demand for unskilled labor in the US.EX more mexicans comming here... |
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Term
| increase nonhuman capital - increases productivity |
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Definition
| buy more machines and stuff for ur firm |
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Definition
| investing education in your workers & advance technology will... |
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Term
| high productivity & high earnings relation |
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Definition
| provides ppl with strong incentives to develop skills, high productivity is key to high living standards, brings self-interest of of someone & harmony with economic process |
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Term
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Definition
| benefits other than normal wages... higher _____ mean lower wages |
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Term
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Definition
| earnings adjusted for differences in the general level of prices across time periods or area |
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Term
| MRP marginal revenue product |
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Definition
| change in total revenue resulting from paying for new employee... EX. Hire security for 25 hr and he only catches 20 hr in stealing.... |
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Definition
| increase in firms revenue if 1 more unit is sold |
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Definition
| in price taker, price & marginal revenue are equal so... |
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Definition
| in price searcher, marginal revenue is less than price so.... |
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Term
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Definition
| an additional unit is used relative to fixed amount to increaes firms output by an equal amount to _____. AKA: change in total output that results because of employment of one more person |
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Term
| SHIFT THE WHOLE DEMAND CURVE |
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Definition
| consumer income change, # consumers in market change, change in price of SUB/COMPLIMENT goods, change in expectation, change in demogrpahics, change in consumer tastes all result in ... |
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Definition
| Price decrease & Quanity bought |
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Definition
| price increase & quanity bought decreased |
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Definition
| price increase & quantity bought increased |
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Definition
| price decreased & quanity decreased |
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Definition
| loss of gains from trade to buyers and sllers that occurs when a tax is imposed. a burden |
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Term
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Definition
| ex. famer adds fertalizer to his plants.... at some point all the fertalizer will start to present less and less benefit and maybe eventually kill plants... |
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