Econ

Front 1

Usual definition of economics

Back 1

how to make decisions in the face of scarcity; how to allocate resources in the face of scarcity

Front 2

book definition of economics

Back 2

- study of the way people organize themselves to sustain life and to enhance its quality
- broader than the usual definition, allows us to discuss environment, etc
- should account for the fact that if you consume a lot, it may harm the earth (cause pollution/extract resources)

Front 3

social organization+ social coordination = ?

Back 3

used to mean involving a number of people

Front 4

positive questions

Back 4

- issues or facts, "what is", how things are, what is the poverty level in our country?
- use descriptive stats to find the answer

Front 5

normative questions

Back 5

- goals and values
- "what should be"/how things should be
- how much effort should be given to poverty reduction?
- requires analysis of what it is we value and what goals should be set

Front 6

intermediate goals

Back 6

not ends in them but are important because they are expected to serve as the means to further ends. desirable in achievement to bring you closer to your finals goals

Front 7

final goals

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sought for their own sake rather than because they will lead to something else, no further justification

Front 8

what is wealth?

Back 8

wealth is defined as the value of all of the material assets owned by an individual, or whatever confers the ability to produce and procure valued goods and services

Front 9

who is associated with the goal of wealth?

Back 9

Adam Smith

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efficiency

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the use of resources in a way that does not involve any waste. inputs are used in such a way that they yield the highest possible value of an output, or a given output is produced using the lowest possible value of inputs

Front 11

when is efficiency achieved?

Back 11

when the maximum value of output is produced from a given set of inputs

Front 12

when is standard value adopted?

Back 12

before the definition of efficiency can begin to be applied

Front 13

well being

Back 13

short hand term for the broad goal of promoting the sustenance and flourishing of life

Front 14

what are not bought/sold in markets?

Back 14

health, fairness and ecological sustainability

Front 15

what are conflicts between goals?

Back 15

if the goal of immediate enjoyment is given too much emphasis, economic activity can decrease health and long term happiness

Front 16

complicated life forms

Back 16

survival imperative works to motivate behavior that will enhance group survival. humans are motivated by their goals and to react to feelings of health, happiness and comfort

Front 17

does equilibrium have pressure for change?

Back 17

no

Front 18

what is pareto optimality?

Back 18

no one can be better off without making someone worse off

Front 19

Marxist economics

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property rights in the form of exchange/ the way production is organized, affect the superstructure (politics, culture art)

Front 20

feminist economics

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our way of economics can be use ful but they would go out and survey people to find out what they think, what happens in the household?

Front 21

Austrian economics

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likes markets, don't believe in equilibrium. do not demand an equal supply. say that economy should be in a state of disequilibrium to benefit entrepreneurs

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Buddhist economics

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Union with God, in God's will. the more stuff we get the happier we will be, buddhist says grasping for our desires will allof us to suffer, if we don't pursue them we will not suffer and be happy. 4 noble truths

Front 23

how many main goals are there?

Back 23

9

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what are the 4 goals?

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1. Satisfaction of basic physical needs; bodily survival, growth, health, protection, security, rest and comfort
2. Happiness; contentment pleasure, self-respect and peace of mind.
3. Realization of one's potential; moral, social and spiritual striving and development
4. Fairness in the distribution of life possibilities; "fair share" of societies resources and opportunities for each person
5. Freedom in economic and social relations; permitting individuals to make as many small and large life choices for themselves as possible
6. Participation in social decision making; opportunity to participate in the processes in which decisions are made that affect the members of a society
7. Sense of meaning; reason or purpose for ones efforts
8. Good social relations; satisfy and trustful friends, family, etc
9. Ecological balance; natural resources and natural environment sustained over the long run, for the well-being of present and future generations

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what is an institution?

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formal constraints on behavior that facilitate purposeful human interaction. Douglas--> tie our hands around our back to get along better. if you buy a car it is YOURS

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formal institution

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codified in structure (law/legal processes/courts/official bodies that enforce institutions)

Front 27

informal institutions

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not as official (norms, customs, ways of doing things we learn, trust)

Front 28

characteristics of capitalist systems

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- free market
- full property rights or private property rights
- enterprise/ own businesses (own freedom)
- economics grow faster than socialist
- can have economic growth but it is not distributed to the lower class (more poor people)
- gov vs corporate businesses (best interest isn't always at heart)

Front 29

characteristics of socialism

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- modeled by Soviet Union before it broke up
- currently China
- government isn't too involved
- "fair share" = less poor people

Front 30

custom coordination

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if everyone follows the custom it goes much better. we all drive on the right side of the road. yes it is enforced y law, but we still do it

Front 31

consent coordination

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happens inside of families. everyone decides by consent to go to the movies. operative firms/organizations

Front 32

administration coordination

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delegation to authority. happens inside
bureaucracies. could be inside a government

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exchange coordination

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captures decentralized markets; apple for an orange. businesses sell products in exchange for money. do what you want, buy what you want, sell what you want

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usus

Back 34

the right to use of something

Front 35

fructus

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the fruit, the rights to benefit from something/some asset

Front 36

consent coordination

Back 36

happens inside of families. everyone decides by consent to go to the movies. operative firms/organizations

Front 37

administration coordination

Back 37

delegation to authority. happens inside
bureaucracies. could be inside a government

Front 38

exchange coordination

Back 38

captures decentralized markets; apple for an orange. businesses sell products in exchange for money. do what you want, buy what you want, sell what you want

Front 39

usus

Back 39

the right to use of something

Front 40

fructus

Back 40

the fruit, the rights to benefit from something/some asset

Front 41

consent coordination

Back 41

happens inside of families. everyone decides by consent to go to the movies. operative firms/organizations

Front 42

administration coordination

Back 42

delegation to authority. happens inside
bureaucracies. could be inside a government

Front 43

exchange coordination

Back 43

captures decentralized markets; apple for an orange. businesses sell products in exchange for money. do what you want, buy what you want, sell what you want

Front 44

usus

Back 44

the right to use of something

Front 45

fructus

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the fruit, the rights to benefit from something/some asset

Front 46

abusus

Back 46

the right to transfer/destroy an asset

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firm

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bond economy, stock is an ownership plan

Front 48

markets

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ways of coordinating decisions/behaviors

Front 49

administrative captialism

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private ownership, but has administration (delegation to authority). Japan, France, Sweden.

Front 50

Lassiez- Faire capitalism

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property rights and markets. use it for activities USA + UK. market driven society, articulate property right structure

Front 51

administrative socialism

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railraods, airlines, trucking, big industries in society. government is primary decision maker. North Korea and Cuba. government runs the show and owns everything, makes the big decisions

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market socialism

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slight use of markets. China + Vietnam. China is growing so quickly bc the gov runs the show, allows for a lot of market activity. Vietnam is doing well for its level of development

Front 53

economic actor/economic agent

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an individual, group or organization that is involved in the economic activities of resource maintenance or the production, distribution or consumption of goods and services

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negative externalties

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harmful side effects on the economy (effect people or environment or people other than those directly involved in the activity) also the environment

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positive externalties

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beneficial side effects or unintended consequences of economic activity that accrue largely to persons or entities that are not among the economic actors directly involved in the activity

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transaction costs

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reduced by good social relations. costs of arranging economic activities, they will be high if info about suppliers is hard to get or if the manufacturer and supplier do n ot trust each other

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resource maintenance

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the management of natural, manufactured, human and social relations in a such way that their productivity is sustained

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production

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conversion of resources into goods and services. goods = tangible objects

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distribution

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the sharing of products and resources among people

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exchange

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the trading of one thing to another

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utlitarianism

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- social welfare function

Front 62

utility

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- index of pain and pleasure of a certain degree by doing something of happiness (preference satisfaction assumptions)
- depends on what you're consuming (x)

Front 63

strength of utility

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- only one intrinsic good; makes it tractable, we can figure out what we are shooting for

Front 64

weakness of utility

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we don't know how to compare one person's utility to the next

Front 65

what is the utility equation?

Back 65

U =u1(x)+u2(x)+u3(x)+…+un(x)
U is total social welfare,
ui is the utility of the ith person,
x is the level of consumption, and
n is the number of people

Front 66

production functions

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Q=f(Q1)
Q1= quantity of input(labor)

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marginal product of labor equation

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change output/change input

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diminishing marginal productivity

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as labor goes up, productivity goes down; those who enter first are most productive

Front 69

public sphere

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government activity, protection (jail, courts), transportation, public goods (national defense)

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core sphere

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home, household, labor in the household, not counted in the market (GDP)

Front 71

percent of public sphere/gov activity

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12%

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percent of core sphere

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30%

Front 73

percent of business sphere

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48%

Front 74

non rivalry public goods

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when one consumes another, still has the ability to consume

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non exclusive public goods

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cannot exclude anyone

Front 76

rationality

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consistent choices

Front 77

motivations

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atruism

Front 78

purest form of capitalism

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private property rights + markets for goods and services (labor and other imports/productions)

Front 79

capitalism government role

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protecting property rights, enforce rules, choose types of laws that society will abide by, provide a safety net ( social security, food, education, housing, etc)

Front 80

precursors to feudalism

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- empires of Egypt, Greece and Rome
- agriculture didn't produce more than a surplus, nothing more than what was needed

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feudalism

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possibility of growth is limited, no surplus, cities depended on taxation (slaves and trade), small growth potential (grew by conquering lands), Middle Ages (15-16th centuries), primary economic and social unit

Front 82

manor

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- lords and surfs
- lords = provide protection for surf
- surfs= tilled land and herded animals; products went to the lords
- religious or secular

Front 83

who was above lords?

Back 83

overlords-> granted land to lords for payments and allegiance

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who was below surfs?

Back 84

slaves

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guilds

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- not a lot of specialization; if you were a craftsperson you owned your tools and made your product from start to finish
- regulated affairs and activities (social, religious, personal, economic)
- regulated production and sales of products; townspeople too
-

Front 86

downfall of feudalism

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change in technology; agriculture. 3- field crop rotation started to occur, urbanization, increase in medeival merchants, crusades and exploration, merging of nation states, decline of manor, breakdown of guilds, rise of protestantism, industrial revolution

Front 87

what was the 3 field crop rotation?

Back 87

in each growing season one field was not used, when you come back to it it will be more productive. increased surplus and easier to support a bigger, urban population

Front 88

globalization

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-reduce the cost of transport, made it more profitable to trade
- trade! increase of imports and exports
- capital flows more easily, invest in a foreign company or a US company in a different country
- multinational corporations= businesses, plants, facilities in other nations

Front 89

benefits of globalization

Back 89

increased trade, increased welfare, specialization on both parts

Front 90

globalization costs

Back 90

specialization has losers, switching specialized products can cause retraining, etc. environmental abuses engage in protectionism, international trade isn't like the textbooks

Front 91

you purchase a company bond that will pay $90 per year for 4 years and then pay you $500 at the end of 5 years. the $500 you receive at the end of the 5 years is known as the what?

Back 91

face value of the bond

Front 92

you hold a company bond that pays $2 per year for 5 years then pays $100 at the end of 5 years. currently, however, bond buyers can get bonds that pay $3 per year. as long as you continue to hold the bond, its yield to maturity is equal to what?

Back 92

2%

Front 93

Joan buys a new bread-making machine, which she plans to use to make bread for sale. the monetized value of what Joan expects to get back from the investment in the FUTURE is referred to as what?

Back 93

returns to capital

*future, will return

Front 94

company ABC runs a calculation of expected returns using several possible assumptions about the life of capital investments, interest rates and other factors. the company is carrying out a what?

Back 94

sensitivity analysis

Front 95

a profit maximizing firm in the TRADITIONAL neoclassical model hires capital services up to the point where the marginal revenue product of manufactured capital is equal to what?

Back 95

MFCmk

Front 96

What is the economistic view of natural capital?

Back 96

resources are valuable only to the extent that they contribute to profitability

Front 97

A factory discharges toxic waste into a river, killing the fish that people depend on for food. according to the Coase theorum...

Back 97

- Defining clear property rights to the resources of clean water and healthy fish can solve the problem, if the transaction costs are not too high
- the people owning the rivers and charging the factory owner for discharging waste
- the factory owner owning the river and collecting fees from the people for NOT discharging waste

Front 98

A company goes out of business and sells all of its physical assets one by one. the money earned on these sales is the companys what?

Back 98

liquidation value

Front 99

what are ways in which a company wants to finance a growth can get funds?

Back 99

taking out a loan
using retained earnings
selling stock
borrowing on an informal financial market

Front 100

What is a speculative bubble situation?

Back 100

people's optimism causes stock values to rise higher than the value that would match the actual assets and profitability of a firm

Front 101

what is an example of a positive externality?

Back 101

a homeowner plants a tree for shade around her house. the tree also provides shade for her next door neighbor

Front 102

what can expand a society's production possibilities frontier?

Back 102

technological innovations

Front 103

what does the production possibilities frontier represent?

Back 103

the tradeoffs between possible production levels for two goods

Front 104

as production of a good increases, the opportunity cost of production increases. how is this notion reflected in the graph of production possibilities frontier?

Back 104

the PPF bows outwards (hillside-looking)

Front 105

as production of a good increases, the opportunity cost of production increases, how is this notion reflected in the graph of production possibilities frontier?

Back 105

the PPF bows outwards (hillside shaped)

Front 106

what is instrumental behavior?

Back 106

people choose their behaviors consciously to achieve certain goals, purposeful

Front 107

when you undertake a pleasant task in hopes of being paid for it, what type of motivation is being used?

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extrinsically motivated

Front 108

what is an example of altruism?

Back 108

a firefighter who gives up his own life to rescue a child

Front 109

what is a person working for who wants to improve the public education system in his city?

Back 109

the common good

Front 110

what are behavior constraints?

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circumstances that affect the options available to you, such as the offerings at a school cafeteria or the set of books available at your local library

Front 111

what is meliorating?

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a continuous effort to achieve a better situation than the present one

Front 112

what is bounded rationality?

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the idea that consider some, but not all, relevant information when making a decision

Front 113

what is a market failure?

Back 113

a situation in which the market form of coordination produces inefficient or harmful results

Front 114

who is Adam Smith/what did he do?

Back 114

wrote The Theory of Moral Sentiments and The Wealth of Nations
work has been used to justify views that aren't always supported
wrote about economic and ethical issues

Front 115

what are the 4 major modes of economic coordination?

Back 115

custom, consent, administration, exchange

Front 116

what is a market failure?

Back 116

a market in which markets yield inefficient or harmful outcomes

Front 117

what is a lassiez-faire economy?

Back 117

an economy with very little government regulation

Front 118

what are examples of physical infrastructure?

Back 118

roads, warehouses, and transport equipment

Front 119

what is a retail market?

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a market in which people buy goods in small quantities for personal use

Front 120

what is a commodities market?

Back 120

markets for raw materials

Front 121

what is a posted price?

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the marked value on something, ie a t-shirt at the mall as opposed to an old-fashioned open air-market where you can bargain

Front 122

what is an auction market?

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a market where an item is sold to the highest bidder

Front 123

what is an example of double auction?

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the NY stock exchange, buyers and sellers state prices at which they are willing to make transactions

Front 124

what is an example of a spot market?

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buyers and sellers negotiating for immediate delivery of fish at a fish market

Front 125

what is bargaining?

Back 125

a situation in which a single buyer and seller negotiate the price of an item

Front 126

What do medieval markets do?

Back 126

- organized their work through guilds
- most production of food and clothing occurred at home
- "just price" doctrine = prices charged should always be fair
- markets were irrelevant to the daily lives of most people

Front 127

what is the industrial revolution?

Back 127

individualism, instrumental rationality, valuing private property, valuing luxury purchases

Front 128

what is empirical investigation?

Back 128

the observation and recording of specific happenings in the world

Front 129

what is time series data?

Back 129

changes in an economic variable over time

Front 130

what is a demand curve?

Back 130

a curve indicating the quantities that buyers are willing to purchase at various prices

Front 131

what are the two functions markets and market pricing prices perform?

Back 131

signaling and rationaling

Front 132

true or false, supply curves are always generated empirically

Back 132

false

Front 133

what is an example of empirical work?

Back 133

Juliana collects data on frog populations in a local pond

Front 134

what is the industrial revolution?

Back 134

individualism, instrumental rationality, valuing private property, valuing luxury purchases

Front 135

what are examples of nonprice determinant of supply of handmade rugs

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available technology for making rugs, the price of looms for weaving rugs, number of rug producers, price of related goods and services

Front 136

what is empirical investigation?

Back 136

the observation and recording of specific happenings in the world

Front 137

what is an example of a movement along a supply curve?

Back 137

the quantity of apples offered for sale increases as the price of apples rises

Front 138

what is time series data?

Back 138

changes in an economic variable over time

Front 139

what is the responsiveness of demand to income known as?

Back 139

income elasticity

Front 140

what is a demand curve?

Back 140

a curve indicating the quantities that buyers are willing to purchase at various prices

Front 141

what are the two functions markets and market pricing prices perform?

Back 141

signaling and rationaling

Front 142

true or false, supply curves are always generated empirically

Back 142

false

Front 143

what is an example of empirical work?

Back 143

Juliana collects data on frog populations in a local pond

Front 144

what are examples of nonprice determinant of supply of handmade rugs

Back 144

available technology for making rugs, the price of looms for weaving rugs, number of rug producers, price of related goods and services

Front 145

what is an example of a movement along a supply curve?

Back 145

the quantity of apples offered for sale increases as the price of apples rises

Front 146

what is the responsiveness of demand to income known as?

Back 146

income elasticity

Front 147

which of the following goods is most likely to have a high price elasticity of demand?

Back 147

a good for which there are many close substitutes

Front 148

what are external costs?

Back 148

project costs that are borne by persons or entities not directly involved in project activity

Front 149

what does the marginal cost curve represent?

Back 149

the cost of producing the last unit at a given level of production

Front 150

tarriffs and quotas are both examples of what kind of policies?

Back 150

protectionist policies

Front 151

A government policy undertaken to reduce reliance on inputs and encourage development of domestic industry can be referred to as what kind of an import?

Back 151

substitution

Front 152

Joe’s parents give him a small private jet for his 16th birthday. what kind of a transfer example is this?

Back 152

an in-kin transfer

Front 153

what is an example of a transfer?

Back 153

you make a donation to the soccer team

Front 154

According to the principle of comparative advantage...

Back 154

each country should specialize in the good it can produce most efficiently compared to its trading partner

Front 155

Who developed the notion gains from trade, looking specifically at the case of two countries exchanging goods based on comparative advantage

Back 155

David Ricardo

Front 156

According to the infant industry argument

Back 156

government should sometimes protect domestic firms from foreign competition until they can compete on their own
tariffs may be justified to protect an industry until it becomes more competitive

Front 157

what is the idea of sovereignty?

Back 157

consumer satisfaction is the ultimate economic goal

Front 158

what is a natural monopoly?

Back 158

a monopoly that emerges because of economies of scale

Front 159

what does the upward-sloping supply curve for labor reflect in terms of wage changes?

Back 159

substitution effect

Front 160

what is the income effect of rising wages?

Back 160

the higher they are, the more leisure people may want to "buy"

Front 161

what does the theory of education suggest?

Back 161

the value of an advanced degree lies in the information it provides about how good a worker and learner the person holding the degree is likely to be

Front 162

what is a monopsony?

Back 162

a situation in which there is only one buyer and one seller