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