Econ 201

Front 1

scarcity

Back 1

a situation in which unlimited wants exceed the limited resources available to fulfill those wants

Front 2

economics

Back 2

study of choices people make to attain their goals given scare resources

Front 3

3 economic assumptions

Back 3

people are rational
people respond to incentives
optimal decision are made at the margin (decisions are made that will have incremental benefits)

Front 4

market

Back 4

a group of buyers and sellers of a good ro service and the institution or arrangment by which they come together to grade

Front 5

marginal analysis

Back 5

analysis that compares marginal costs and benefits

Front 6

trade-off

Back 6

because of scarcity societies are forced to choose producing one good or service over another

Front 7

opportunity cost

Back 7

the highest valued alternative that must be given up to engage in an activity

Front 8

trade offs force society to answer which questions

Back 8

what goods and services will be produced?
how will the goods and services be produced?
who will receive the goods and services?

Front 9

centrally planned economy

Back 9

an economy in which the government decides how economic resources are allocated

Front 10

market economy

Back 10

an economy in which the decision of households and firms interacting drive how economic resources are allocated

Front 11

mixed economies

Back 11

an economy in which most economic decisions result from buyer/seller interactions, but the gov plays a significant role in the allocation of resources

Front 12

productive efficiency

Back 12

a situation in which a good or service is produced at the lowest possible cost

Front 13

allocative efficiency

Back 13

state of the economy in which production is in accordation with consumer preferences. Every good/service is produced to the point where the last unit provides a marginal benefit equal to the marginal cost of production

Front 14

voluntary exchange

Back 14

where the buyer and seller of a product are better off by the transaction

Front 15

equity

Back 15

the fair distribution of wealth

Front 16

steps to develop an economic model

Back 16

decide on the assumptions
formulate a testable hypothesis
use economic data to test the hypothesis
revise the model if it fails
retain the revised model to help answer similar economic questions

Front 17

positive statement

Back 17

something that can be tested

ex: an increase in trees will reduce global carbon atm levels

Front 18

normative statement

Back 18

something that makes a statement about how things should be

ex: immigration should be allowed

Front 19

study of micro vs macro

Back 19

micro studies how households and firms make choices and how they interact in markets

macro studies the economy as a whole including inflation, unemployment, and economic growth

Front 20

innovation

Back 20

a broad significant improvement to society

Front 21

percent change

Back 21

final - original
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original

Front 22

factors of production

Back 22

workers, capital, natural resources, and etrepreneaurial ability

Front 23

Production possibilities frontier

Back 23

a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology

Front 24

Is a PPF linear

Back 24

usually not
1 unit of one product does not necessarily equal 1 unit of another product

Front 25

points on a PPF line represent

Back 25

combination of production of two quantities that is attainable

Front 26

a point that lies inward of the PPF line represents

Back 26

a scenario that is attainable but inefficient

often happens in scenarios where there has been unemployment or recessions

Front 27

a point that lies outside of the PFF line represents

Back 27

an unattainable scenario given the amount of resources

Front 28

increasing marginal opportunity cost

Back 28

devoting more resources to one quanity will lead to larger decreases in the production of the other item

the more resources devoted to an activity the smaller the pay to devoting additional resources to the other activity.

Front 29

what is implied by a shift out in the ppf

Back 29

resources and technology increased

Front 30

trade

Back 30

the act of buying and selling

Front 31

In a linear scenario, how to you calculate the opportunity cost

Back 31

opp cost of B is A/B

Front 32

absolute advantage

Back 32

the ability of an individual/firm/country to produce more of a good/service than competitors using the same amount of resources

Front 33

comparative advantage

Back 33

ability of an individual/firm/country to produce a good or service at a lower opportunity cost than competitors

Front 34

what is the basis for trade

Back 34

comparative advantage

Front 35

product markets

Back 35

markets for goods and services

Front 36

factor markets

Back 36

markets for the factors of production, such as labor, capital, natural resources, etc

Front 37

factors of production

Back 37

the inputs used to make goods and services

ex include capital (ex computers and machine tools) and labor

Front 38

free market

Back 38

few gov restrictions on how a good can be produced and how a factor of production can be employed

Front 39

entrepreneur

Back 39

someone who operates a business, bringing together the factors of production to produce good and services

Front 40

property rights

Back 40

the rights of individuals/firms have to the use of their property including the right to buy or sell

Front 41

the difference between capital goods and consumption goods

Back 41

capital goods are goods that are used to produce more goods/services (such as computers, factories, machines)

consumption goods are final for the consumer

Front 42

How are resources used related to economic growth in the future

Back 42

the more resources dedicated, the more economic growth

Front 43

which leads to more economic growth, dedicating resources to capital or consumptive goods?

Back 43

capital goods

Front 44

when the comparative advantage is the same for two companies can there be gains from trade?

Back 44

no

Front 45

one of the benefits of trade

Back 45

increasing production and consumption

Front 46

does private property rights include intellectual property?

Back 46

yes

Front 47

product market

Back 47

final market designed for a good/service

Front 48

who demands and supplies in a product market?

Back 48

the households demand and firms supply

Front 49

factor markets

Back 49

markets for the inputs of production (labor, capital, natural resources)

Front 50

who supplies and demands in a factor market

Back 50

individuals supply and firms demand

Front 51

assumptions of supply and demand

Back 51

there is no market failure and markets are perfectly competetive

Front 52

what is a perfectly compteitive market?

Back 52

A market that meets the conditions of 1) many buyers and sellers 2) all firrms selling identical products, and 3) no barriers to new firms entering the market

Front 53

in a perfect competitive market what is the economic profit assumption

Back 53

account profit + opportunity cost = 0

Front 54

in a market system who decides what goods and services will be produced

Back 54

consumers

Front 55

what is the main factor that will influence a consumers willingness to buy a product

Back 55

price

Front 56

demand schedules

Back 56

a table showing the relationship between the price of a product and the quanity of the product demanded

Front 57

quantity demanded

Back 57

(often graphed just as quantity) referes to the amount of a good/service that a person is willing and able to purchase at a given price

Front 58

demand curve

Back 58

a curve that shows the relationship between the price of a product and the quantity demand (willingness to buy)

Front 59

market demand

Back 59

the demand by all consumers for a good/service

Front 60

what is the law of demand

Back 60

holding everything constant, certis parabis, when the price of a product falls, the quantity demanded for the product increases and vice versa

Front 61

Two reasons that the demand curve is downward sloping?

Back 61

substitution effect and income effect

Front 62

substitution effect

Back 62

the change in quantity demand tat results from a change in price, making the good more or less expensive in relation to other substitutes.

Front 63

income effect

Back 63

the change in quantity demand resulting from the effect of a change in a good's price on consumers' purchasing power

Front 64

what causes a shift along the demand curve

Back 64

change in priice

Front 65

what causes a shift to a new demand curve

Back 65

a variable other than price is not held constant:

income
price of related goods
tastes
population and demographics
expected future prices

Front 66

normal good

Back 66

a good for which the demand increases as income rises and decrease as income falls

ex: prime rib

Front 67

inferior good

Back 67

a good for which the demand increases as income falls and decreases as income rises

ex: tap ramin

Front 68

how does income affect a demand curve

Back 68

if affects ones ability and willingness to spend money

during a recession the demand curve for a normal good will shift to the left, but for an inferior good may shift to the right

vice versa

Front 69

explain how substitutes affect each other demand curves

Back 69

if the price of X good goes up, its demand will go down, but its substitute, Y, will go up in demand

Front 70

explain how complements affect each others demand curves

Back 70

if the price of X good goes up, its demand will go down, but its compliment, Y, will go down in demand as well

Front 71

how do tastes affect a demand curve

Back 71

consumers are influenced by advertising campaigns

if an ad makes product X, more desirable, demand will increase

Front 72

how does population and demographic generally influence a demand curve

Back 72

in general, more people means more demand

demographics will have different preferences (ex: baby boomers and health care)

Front 73

how does expected future prices affect a demand curve

Back 73

if it is expected that price will increase, the demand for a product will increase as well

Front 74

what is the difference between a change in demand and a change in quantity demanded

Back 74

a change in demand means a shift in the demand curve

a change in quantity demanded refers to a change that happens along the demand curve as a result of price

Front 75

quantity supplied

Back 75

the amount of a good or service that a firm is willing and able to supply at a given price

Front 76

supply schedule

Back 76

a table that show the relationship between the price of a product and the quantity of the product supplied

Front 77

supply curve

Back 77

a curve that shows the relationship between the price of a product and the quantity of the product supplied

Front 78

law of supply

Back 78

Everything else constant, increases in price cause increase in quantity supplied, decreases in price lead to decreases in quantity supplied

Front 79

what is the slope of a supply curve

Back 79

positive

Front 80

what variables shift market supply?

Back 80

prices of inputs
technological changes
prices of substitutes in production
number of firms in the market
expected future prices

Front 81

how does price of inputs shift supply?

Back 81

If the cost of an input rises then the cost of production will increase, making less profit, and supply will decline

vice versa

Front 82

as the price of a product increases under a supply schedule the quantity supplied...

Back 82

increases

Front 83

how does technological changes shift supply?

Back 83

Positive technolgical change leads to lower costs, increasing profit, increasing supply to the right, and vice versa

Front 84

technological change

Back 84

a positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs

po = firm is able to produce more output using the same amount of inputs

Front 85

how does the price of substitutes in product affect supply

Back 85

If the price of making one good is not as profitable for a company, then the company will shift from that product and produce its substitute instead. It will increase supply for the alt product and decrease for the original product

Front 86

how does the number of firms in the market affect supply

Back 86

When new firms enter it shifts the supply curve to the right

When firms exit the supply curve shifts to the left

Front 87

how do expected future prices affect supply

Back 87

if a firm expects that the price of a product will be higher, it will decrease supply and increase it in the future

Front 88

difference between change in supply and change in quantity supplied

Back 88

change in supply refers to a shift in the supply curve

change in the quantity supplied refers to a change relating to the products price and is along the curve

Front 89

market equilibrium

Back 89

a situation where quantity demanded equals quantity supplied

Front 90

competitve market equilibrium

Back 90

a market with many buyers and sellers

Front 91

assumptions of market equilibrium

Back 91

that there are enough sellers to be competitive

Front 92

Technology

Back 92

the way in which firms combing inputs to make a product

Front 93

surplus

Back 93

a situation in which quantity supplied is greater than quantity demanded

Front 94

shortage

Back 94

a situation in which quantity demanded is greater than quantity supplied

Front 95

when new firms enter the market what happens to the supply curve

Back 95

shift to the right

Front 96

two single shifts that will increase equilibrium price

Back 96

increase demand or decrease supply

Front 97

what happens when you increase D

Back 97

increase P and increase Q

Front 98

what happens when you decrease D

Back 98

decrease P decrease Q

Front 99

what happens when you decrease S

Back 99

increase P decrease Q

Front 100

what happens when you increase S

Back 100

deacrease P increase Q

Front 101

what happens increase D and S

Back 101

P unknown, Q increases

Front 102

what happens decrease D and S

Back 102

P unknown, Q decreases

Front 103

what happens decrease D and increase S

Back 103

P down, Q unknown

Front 104

what happens increase D, decrease S

Back 104

P up, Q unknown

Front 105

marginal benefit

Back 105

the amount that a person is willing to pay for a good/service

the more the person consumes, the smaller the marginal benefit

Front 106

marginal cost

Back 106

the cost that comes from making one additional good/service