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34 Cards in this Set
- Front
- Back
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What are some Price Ceiling problems?
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-Insufficient allocation to consumer -can lead to low quality -waster resources -reduced quantity producers are willing to create -leads to black market / illegal activities |
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What are some Price Floor problems?
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-Limits amount of goods -waste of resources |
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What is Protectionism?
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Something done in order to protect a country's currency.
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What is a Quota?
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A limit set on the amount of goods that can be sold or produced. (Hunting limits ect.)
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When does excess demand or shortage occur?
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When demand is greater than quantity supplied.
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When does excess supply or surplus occur?
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When the quantity supplied exceeds quantity demanded.
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What is a consumer surplus?
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The maximum amount a person is willing to pay minus its current market price.
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What is a deadweight loss?
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A total loss of under produced or overproduced goods. |
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What is the relationship between supply, demand and currency?
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Currency is dependent on the demand compared to other countries. A strong U.S. dollar could lead to plunging exports. |
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What happens when currency is depreciated?
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In the long run, high levels of inflation occur. |
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Give examples of government price controls.
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Legal restrictions on how high or low a price can be. Price ceiling: Maximum price allowed. |
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What is the demand relationship?
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1) the price of the good 2) taste preferences / level of desire of the buyer 3) Income of the buyer ( job, interest / dividends, government sources, real estate income) 4) Prices of related goods 5) Future expectations ( waiting for better deal) 6) Total market demand. (# of buyers) |
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What is the law of diminishing marginal utility (Value)?
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You will never yield as much satisfaction from subsequent units as you would the first.
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How does demand affect normal goods?
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Demand goes up when income is higher, demand goes down when income is low.
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How does demand affect inferior goods?
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Demand falls when income rises. Example : public transportation |
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How does demand affect substitute goods? |
Demand increases in substitute goods when the demand in normal goods decreases.
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What are the different types of goods?
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Normal goods, inferior goods, substitute goods and complimentary goods.
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How does demand affect complimentary goods? |
Generally the increase in complimentary goods goes hand in hand with the increase in demand of normal goods.
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What are positive economics?
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understanding behavior and buying patterns. |
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what are normative economics? |
understanding the outcomes |
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Explain the circular flow diagram. |
Households lead to goods and services. Goods and services leads to firms. Firms lead to factory or markets. Markets lead to Households.
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What is the law of demand?
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What happens when there is a surplus?
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Prices get driven down because demand is lower.
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What happens when there is a shortage?
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Prices are driven up due to the high volume of demand.
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What is supply and demand equilibrium? |
When Supply = Demand |
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What affects household demand?
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-Income -Wealth ( assets - liabilities) -Pries of available goods. |
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What are the 12 core principals of economics?
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1) Choices must be made due to limited resources. 2) True cost of something is it's opportunity cost. 3) "How Much" is a decision made at the margin. 4) People usually respond to incentive. 5) There are gains from trade. 6) Markets move toward equilibrium. 7) Resources should be used efficiently to achieve society's goals. 8) Markets usually lead to efficiency. 9) Government intervention can improve society's welfare. 10) One person's spending is another person's income. 11) Spending can get out of line with the economy's productive capacity. 12) Government policies can change spending. |
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What is comparative advantage?
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Each country should specialize on what they can produce most efficiently and trade for the rest. |
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What is capital?
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goods that are used to produce other goods and service |
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Equity
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Fairness |
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Treasury Secretary |
Jack Lew |
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Chair of Federal Reserve |
Janet Yellen |
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Utility
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Value |
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