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52 Cards in this Set
- Front
- Back
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Needs
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are limited
clothing, food, shelter |
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Resources
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Land (A)
Labor (L) Capital (K) - physical k: machinery, equipment - financial k: bonds, stocks - human k: endowments of education, on the job training, job experience |
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Investment
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addition to the k stock
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physical k investment
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bring another computer to class
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3 spheres of economic activity
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the core sphere: within a household family. work rewarded by products of work. Respond more to needs than to wants.
the public sphere: government organizations. non-profit. nonexclusive and nondiminishable. business sphere: firms that produce goods/services the profitable sale |
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Anti-Legislation
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Anti-trust legislation is legislation designed to break up existing monopolies and prevent the formation of new monopolies to increase competition and societal welfare.
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Externalities
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governments corrects for externality
unintended consequence of a production/consumption process negative externality- social cost is greater than private cost ex. smoking indoors (second hand smoke) and Tax Positive externality- social benefits are greater than private benefit ex. college education |
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Free Rider
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Someone who enjoys who enjoys the benefits of a public good without incurring the cost
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Government
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Public Sector, Anit Trust Legislation, Externalities, and Redistribution
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Redistribution
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taxes and subsidies
Buffet Rule- millionaires should pay at least 30% of taxes |
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Increase of Supply
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moves right
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Increase of Demand
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moves to right
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Decrease of Demand
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moves to left
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Decrease of Supply
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moves to left
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Law of Demand
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There is an inverse relationship the price of the product and the quantity of the product demanded
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D-schedule
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a table that shows the relationship between the price of product and the quantity of that product demanded. Everything call other determinants of demand held constant (ceteris paribus)
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Substitutes
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we consume one or the other
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Complements
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goods/services that go together
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Determinants of Demand
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- # of consumers
- prices of substitutes - taste - income - expectations (future prices and future income) |
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Price of substitute goes down
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demand goes down
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Increase of Supply
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moves right
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Increase of Demand
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moves to right
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Decrease of Demand
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moves to left
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Decrease of Supply
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moves to left
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Law of Demand
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There is an inverse relationship the price of the product and the quantity of the product demanded
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D-schedule
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a table that shows the relationship between the price of product and the quantity of that product demanded. Everything call other determinants of demand held constant (ceteris paribus)
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Substitutes
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we consume one or the other
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Complements
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goods/services that go together
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Determinants of Demand
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- # of consumers
- prices of substitutes - taste - income - expectations (future prices and future income) |
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Price of substitute goes down
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demand goes down
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Price of substitute goes up
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demand goes up
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If price of a compliment goes down
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demand increases
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Determinants of Supply
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- price of a product
- cost of production a) prices of input b) technology c) expectations d) # of sellers/ firms |
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S-schedule
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a table that shows the relationship between price and quantity supplied
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Law of Supply
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if price goes up quantity goes up
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Excess Demand (Shortage)
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Qd > Qe
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Price Elasticity
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Ep is greater than 1
Consumers are very responsive to change in price as price increases demand decreases significantly |
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Price Inelasticity
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Consumers are not responsive to price change
Ep is less than 1 as increases demand does not significantly change Ep grea |
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Excess Supply (Surplus)
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Qs > Qd
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Invisible hand theorum
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no need for government to intervene
by Adam Smith "Wealth of Nations |
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If cost of production goes up
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supply goes down
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Income goes down
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Demand goes down
Price goes down Quantity goes down |
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Labor Unions
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affect supply
raise cost of production |
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Determinants of price of elasticity of demand
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Necessity v. Luxury
Time Span Availability of substitutes broad categories v. specific produces share income |
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Ep is always...
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negative
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Ep is equal to 1
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unit elastic demand
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Total Revenue
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price of product X how much of product sold
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Mid point formula
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Ep = Q2 - Qaverage/p2-Paverage X Paverage/Qaverage
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private sector
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has no incentive to provide public goods
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|Ep|
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|percent change in quantity/percant change in price|
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explicit costs
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involve money payment
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implicit cost
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do not involve money payments
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