Econ 4010 Exam 1

Front 1

economics

Back 1

the study of how scarce resources are allocated among alternative uses

Front 2

microeconomics

Back 2

study of the economic behavior of individual units and decision-makers (i.e consumers, firms, owners of resources)

Front 3

macroeconomics

Back 3

deals with behavior of economic aggregates like gross domestic product and the level of employment

Front 4

model

Back 4

composed of a number of assumptions from which conclusions can logically be deduced. designed to identify the sort of information that firms and individuals might need.

Front 5

accuracy of prediction

Back 5

the precision of a model. what level of preciseness is necessary?

Front 6

range of applicablity

Back 6

which customers/population can the model be applied to?

Front 7

things to consider in evaluating a model

Back 7

accuracy of prediction, logical consistency (do not contradict), range of applicability, using the best available model.

Front 8

positive analysis

Back 8

what would happen in a particular system if something were to change

Front 9

normative analysis

Back 9

what should be done in response to changes

Front 10

price system

Back 10

decisions are guided by the information contained in the prices of various goods, services and factors or production

Front 11

market

Back 11

group of firms and individuals who are in touch with one another for the purpose of buying or selling some good

Front 12

market demand schedule

Back 12

table that shows the quantity of the good that would be purchased at each possible price

Front 13

market demand curve

Back 13

graphical plot of the market demand data

Front 14

slope of demand curve

Back 14

negative, for the most part, because as the price falls, the quantity demanded increases

Front 15

time period

Back 15

any demand curve pertains to some period of time and that its shape and position depend on the length and other characteristcs of that period

Front 16

factors that determine position and shape of demand curve

Back 16

time period, consumers tastes, consumers incomes, other prices

Front 17

market supply schedule

Back 17

table that shows the quantity of a good that would be supplied at various prices

Front 18

market supply curve

Back 18

depicts the data of the market supply schedule on a graph

Front 19

slope of supply curve

Back 19

slopes upward and to the right. As the price increases, the quantity supplied increases.

Front 20

factors that determine supply curve

Back 20

time period, technology, input prices

Front 21

equilibrium

Back 21

situation from which there is no tendency to change. can persist indefinitely

Front 22

equilibrium price

Back 22

price that can be maintained over a long period of time. where the quantity demanded equals the quantity supplied

Front 23

indifference curves

Back 23

a curve that is plotted in terms of units of alternative goods that show those market baskets (combinations of goods) among which the consumer is indifferent

provides a representation of the consumer's tastes

Front 24

indifference map

Back 24

series of indifference curves

Front 25

utility

Back 25

a number that indicates the level of enjoyment or preference attached by a consumer to a market basket

Front 26

marginal rate of substitution

Back 26

the maximum number of units of good Y that the consumer would willingly sacrifice in return for an extra unit of good X while still keeping his or her level of satisfaction unchanged.

aka, equal to the absolute value of the slope of the indifference curve

Front 27

corner solution

Back 27

where the budget line reaches the highest achievable indifference curve along an axis

Front 28

ordinal utility

Back 28

consumer can only rank market baskets with regard to the satisfaction they give him or her. all that is needed is a ranking.

Front 29

cardinal utility

Back 29

use numbers to measure

Front 30

util

Back 30

traditional unit in which utility is expressed

Front 31

total utility

Back 31

a number representing the level of satisfaction that a consumer derives from a particular market basket

Front 32

marginal utility

Back 32

the additional satisfaction derived from an additional unit of a commodity (when the levels of consumption of all other commodities are held constant)

Front 33

law of diminishing marginal utility

Back 33

as a person consumes more and more of a given commodity, the marginal utllity of the commodity eventually will tend to decline.

Front 34

budget allocation rule for cardinal utility

Back 34

the utility-maximizing customer will allocate his expenditures among commodities so that, for every commodity purchased, the marginal utility of the commodity is proportional to its price

Front 35

budget allocation rule for ordinal utility

Back 35

highest pssoble ic be tangent with th ebudget constraint at the equilibrium point

Front 36

revealed preference

Back 36

a way to deduce consumers preferences from behavior

Front 37

marginal rate of substitution

Back 37

the rate at which a consumer is willing to substitute good x for good y just so that his or her total level of satisfaction is constant

Front 38

price ratio

Back 38

rate at which the consumer could actually substitue good x for good y in the market

Front 39

income consumption curve

Back 39

a curve connecting points representing equilibrium market baskets corresponding to all possible levels of the consumer's money income. Curves of this sort can be used to derive Engel curves.

Front 40

Engel curve

Back 40

the relationship between the equilibrium quantity purchased of a good and the consumer's level of income