Economics

Front 1

What is economics?

Back 1

A study of choices that people make to attain their goals given scarce resources.

Front 2

Three key economic ideas

Back 2

1. people are rational
2. people resond to incentives
3. rational decisions occur at the margin

Front 3

Oppertunity Cost

Back 3

What another good you have to give up in order to obtain what you want.

Front 4

Three fundamental questions of economics

Back 4

1. What is going ot be produced?
2. HOw is it going to be produced?
3. Who is going to benefit?

Front 5

Positive vs. Normative Economics

Back 5

+: economic statements about what is

-: economic statements about what should be.

Front 6

Production possibility fronteer

Back 6

if you are inside the curve, you are either not using all of your resources and/or you are not being efficient.

Front 7

Economic law

Back 7

When economists see a phenomenon so grat and so many times that a law is made of it.

Front 8

Law of increasing costs

Back 8

As you produce more of something, its oppertunity cost rises.

Front 9

Autarky

Back 9

Country is by itsself, no trade

Front 10

Zero sum game

Back 10

amount winners win is the same amount that the losers lose

Front 11

consumer soveinernty

Back 11

products that are produced is determined by consumer

Front 12

Productive efficiency

Back 12

producing good at lowest possible price

Front 13

change in amount demanded

Back 13

the only thing that can bring about change in demand is the price of the same product

Front 14

five things that can change demand

Back 14

1. change in prices of other goods (substitutes, complements, unrelated)
2. change in income
3. tastes or preferences
4. change in population
5. change in expected future prices

Front 15

five things that can make a supply curve move

Back 15

1. input prices
2. change in technology
3. changes in prices of other goods
4. expectations of future prices
5. number of suppliers

Front 16

substitution effect

Back 16

change in quantity demanded that results in a change in price, making it more or less expensive than substitutes

Front 17

income effect

Back 17

change in price demanded that results from the effect of a change in goods price on consumers purchasing power

Front 18

ceterisparibus

Back 18

"all else equals" -- when you examine the effects of a change between 2 variables, you must hold everything fixed.

Front 19

externalities

Back 19

two or more parties who agree on something that might have a positive or negative effect

Front 20

four causes of neg. externalities

Back 20

1. increase cost of other businessess
2. increase cost of households
3. deteriation of health
4. aesthetic costs

Front 21

coase theory

Back 21

if you have well-defined property rights, the neg. externalities will take care of themselves.

Front 22

command system

Back 22

someone goes and determines how much every company has to reduce pollution

Front 23

tragedy of the commons

Back 23

everyone knows its going to end bad, but people do it anyways

Front 24

merit goods

Back 24

private good that government wants you to consume, ex. savings bonds, elementary education

Front 25

merit bads

Back 25

private good that gov't does not want you to consume ex. cigarettes

Front 26

market failures (2)

Back 26

1. externalities
2. free rider

Front 27

5 things that will determine if a product is elastic

Back 27

1. the existance of substitutes
2. definition of market
3. time span
4. important to be unimportant
5. necessities/luxuries

Front 28

Consumer surplus

Back 28

amount of $ a person is willing to pay over equilibrium

Front 29

producer surplus

Back 29

the amount of $ that a producer is willing minimum to pay under equillibrium.