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57 Cards in this Set

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  • Back
Law of Diminishing Marginal Returns
When combining variable inputs with fixed inputs, there will come a point that output increases but at a decreasing rate
What is a fixed input
amount of input used in production doesnt change
What is a variable input
amount of input used in production does change
A change in quantity supply is caused by...
a change in price
What happens to graph with a change in quantity supply
change along supply curve
What happens to graph with a change in supply
shif of supply curve
What are the two determinants of supply?
the price of inputs and the level of technology
equilibrium price
price where quantity supply equals quantity demand
fishbowl/stable equilibrium
when disturbed, reestablishes itself
knife edge/unstable equilibrium
when disturbed, does not resestablish itself
What cause a change in price?
change in the supply or demand
Law of One Price
Products tend to be sold at only one price, the equilibrium price
Price gauging
sudden rapid increase of the price of good/service follwing a natural disaster
Price ceiling
a limit on the price of product/service established by govt
Effect of a price ceiling
1) shortage of quantity
2) something is need to decide who will get the limited supplies
3) Rises the market value of a good/service
4) encourages a black market
5) weeds out those who dont really need it
Economic triage
study of those who really need a certain limited resource
market value
By making a good more scarce, you make the amount people are willing to pay per unit increase
price floor
Govt limit on prices falling below minium. Causes a surplus in supply
The higher the wage, the ___ the demanded hours by employers
Lower
The lower the wage, the ___ the demanded hours by employers
Higher
nepotism
Hiring family and friends
___ pay for imports
exports pay for imports
tariff
extra tax foriegn buyers must pay
protectionsim
protects domestic industries from foriegn trade; opposite of free trade
3 fears of free trade
1) increases unemployment by shipping jobs overseas
2) lowers domestic wage rates
3) leads to trade imbalances or trade deficit
Asset
anything you invest in
90% of US economy is?
associated with services
trade deficit
when imports exceed exports
current account
measures value of imports/exports of goods AND services
capital account
measures investments
when foreigners invest in US it ___ our ___
increases our trade deficit
current account value + capital account value =
0
the bigger the account deficit the ___ investment in US
more investment in US
real cash balance effect
When the supply of money falls, the purchasing power of the money that remains, rises
consumer ___ drives the economy
consumer desire
3 people associated with Public Choice Eonomics
James Buchanan, Gordon Tullock, Kenneth Arrow
Impossibility Theorem
Kenneth Arrow: impossible to have any system of voting that perfectly reflects the will of the people
Pair-Wise voting
option A vs option B, winner continues vs option C
Condorcet winner
an option that will always win, regardless of the order voting is done
by choosing ___ the vote ___ you can influence the result
where the vote starts
Agenda setter
one who chooses where the vote starts and controls process by which new options are added
Voting only measures the ___ of our preferences, not the ___
order, not intensity
SIG (Special Interest Group effect)
occurs when the cost of a program is distributed diff. than the benefits
Rational ignorance effect
voters do not spend a lot of resources to inform themselves about elections
Bundling effect
people pick the bundle closest to their needs
Capture theory of regulation
even if regulation began with good intentions, the regulators get captured by the people they're regulating (ex. taxis)
Baptists and Bootleggers theory
a proposal is most likely to be enacted into law when supported by not-materialistic group and materialistic groups
Public good
if a good is supplied to one person, it is supplied to others (ex. Military)
Two aspects of a public good
1) non-excludability: impossible to prevent others from it
2) wide consumption ability: if provided to one, provided to all
externality
When two people engage in transaction that effects others with no say in transaction (ex. Pollution)
Gov. got money from what before the income tax
revenue tariffs and alcohol taxes
personal income tax: date, amendment, meant to effect
1913, required 16th amendment, meant to effect only the wealthy
proportional/flat tax
rate does not change with income
progressive tax
as income rises, tax rate increases
regressive tax
as income rises, tax rate decreases
Laffer curve
total revenue vs tax rate
tax avoidance vs tax evasion
tax avoidance: legally not paying taxes
tax evasion: illegally not paying taxes