Econ Exam 1

Front 1

Normal good

Back 1

good that varies directly with money income

Front 2

inferior good

Back 2

varies inversely with money income

Front 3

market

Back 3

any institution that enables buyers and sellers to interact and transact with each other

Front 4

competitive markets

Back 4

so many buyers and sellers that no individual buyer or seller has any control over market price

Front 5

demand

Back 5

refers to goods and services people are willing and able to buy during a certain time period

Front 6

law of demand

Back 6

holding all variables constant as the price increases the quantity demanded decreases or vice versa

Front 7

income effect

Back 7

Affects demand price goes up income stays the same can buy less. Lower price increases the purchasing power of a buyers income so they can purchase more or a higher price decreases the purchasing power and they buy less

Front 8

substitution effect

Back 8

when the price of a good increases and a substitute exists then consumers decrease purchases of the good and buy the substitute instead.

Front 9

change in the quantity demanded

Back 9

as the price changes the quantity demanded changes. This is a slide from 1 pt in the demand curve to another pt on it.

Front 10

increase in demand

Back 10

rightward shift in demand curve

Front 11

decrease in demand

Back 11

leftward shift

Front 12

the 5 demand shifters are

Back 12

price of substitutes, incomes, number of buyers, tastes of fads, expectations about future prices

Front 13

incomes

Back 13

when incomes rise usually demand rises for normal goods. Unless you don't want it. As income rises demand for inferior goods decreases. Exp. instead of buying used cars you buy new

Front 14

number of buyers

Back 14

increase or decrease in population changes demand

Front 15

tastes

Back 15

study comes out making saying chocolate good for you demand increases.

Front 16

expectations about future price

Back 16

when gadget first comes out expensive. If you expect the price to drop demand is lower. expect higher price demand is increased

Front 17

supply

Back 17

maximum amount of a product or service that a seller is willing and able to provide for sale during a given time period other things being equal

Front 18

law of supply

Back 18

holding other factors constant as the price of a good increases the quantity supplied increases and vice versa

Front 19

substitution effect on supply

Back 19

as the price of good x goes up production shifts to that product and away from production of other products with other prices.

Front 20

causes of shift in supply

Back 20

cost of resources changes, technology, number of sellers, expectations about what happens in the future, price of other commodities the firm can produce

Front 21

econ shortage vs. real shortage

Back 21

price increase won't fix it. On a sinking boat there are 3 life jackets and 4 ppl. Even if you raise the price there's still a shortage.

Front 22

increase in demand

Back 22

higher price higher quantity

Front 23

decrease in demand

Back 23

lower price lower quantity

Front 24

increase in supply

Back 24

lower price higher quantity

Front 25

decrease in supply

Back 25

increase in price decrease in quantity

Front 26

in demand and supply go up

Back 26

quantity goes up price unknown

Front 27

if demand and supply go down

Back 27

quantity goes down price unknown

Front 28

if demand increases and supply decreases

Back 28

price increases and quantity is unknown

Front 29

if demand decreases and supply increases

Back 29

price decreases and quantity is unknown

Front 30

when dollar value is down what happens to exports?

Back 30

increase

Front 31

interest rates

Back 31

go up things aren't soldbecause they are more expensive

Front 32

wage stagnation

Back 32

prices increasing and wages stay the same making consumers worse off

Front 33

economics

Back 33

the study of the allocation of scarce resources to satisfy competing ends

Front 34

Resources at economies disposal

Back 34

natural resources, capital (physical resources), labor force, entrepreneurship, and time

Front 35

What kind of market does the US have?

Back 35

free market economy

Front 36

what are the 4 key questions an economy must answer?

Back 36

what should be produced, how much of it should be produced, how to produce it, and how the output will be allocated.

Front 37

private ownership

Back 37

has a large impact on the use of resources. If we don't own them they will be depleated because we have no interest in it.

Front 38

opportunity cost

Back 38

the next best alternative to the option given

Front 39

rational

Back 39

you act in your own self interest according to your information set and your constraints.

Front 40

what kindo of science is econ

Back 40

a social science

Front 41

negative incentive

Back 41

increase cost or decrease benefit

Front 42

positive incentive

Back 42

increase the benefit or decrease the cost

Front 43

marginalism

Back 43

economists think on the margin on the edge, additional or extra.

Front 44

how do individuals make decisions?

Back 44

by weighing the costs. If the marginal benefit is greater than the cost then they make the decision

Front 45

Fallacy of composition

Back 45

just because it's true for one doesn't mean it's true for all

Front 46

Microeconomics

Back 46

the study of the individual components of the economy

Front 47

macroeconomics

Back 47

the study of the aggregate (total) economy

Front 48

positive economics

Back 48

involves a statement about facts. Something that can be proven to be true or false

Front 49

normative economics

Back 49

someone's opinion about what ought to be. Can't be proven true or false

Front 50

correlation

Back 50

other 2 variables both increase or decrease at the same time or is one increases the other falls

Front 51

scientific method for econ

Back 51

observe and hypothesize, test, accept, reject or modify hypothesis, and if accepted it becomes an economic principle

Front 52

ceteris paribus

Back 52

hold all variables constant except those that we are studying

Front 53

independent variable

Back 53

variable that changes first and hopefully causes the change in the dependent variable

Front 54

production possibilities curve

Back 54

scarcity can't go to point outside. efficiency on the edge of the curve is best, trade offs show all possibilities

Front 55

law of increasing opportunity cost

Back 55

assuming a lack of perfect flexibility or interchangability in resources the opportunity cost increases as more of the goods are produced

Front 56

constant opportunity cost

Back 56

straight line. As you expand production of one good you always give up the same amount of the other

Front 57

what must be true of trade

Back 57

trade must always have a mutual gain

Front 58

specialization

Back 58

concentration on the production of a limited number of goods and services rather than trying to produce everything you consume

Front 59

comparative advantage

Back 59

the ability to produce something at a lower opportunity cost than another individual or country

Front 60

absolute advantage

Back 60

ability to produce something with fewer resources than other or produce more with same amount of resources

Front 61

law of comparative advantage

Back 61

an individual, firms, or a country should specialize in producing the good or service which it has a comparative advantage for and trade for the rest. Overall output will be increased.