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48 Cards in this Set

  • Front
  • Back
basic definitions of economics
1) study of scarciety
2) "study of the allocation of scarce resources to satisfy unlimited wants"
3 study of the material reproduction of society
general forms of economic society
1) traditional
2) command
3) market systems
3 Questions societies must answer
1) What goods to produce
2) How do we produce them? (organization of labor, etc.)
3) For whom do we produce? (need vs. market)
traditional society
1) stable
2) low growth
command society
1) decision making is centralized (gov or big business)
2) (un)democratic? --mechanism for accountability
market systems
1) distribute resources on basis of supply and demand
2)commodities: land, labor, capital (man made aid to production)
3) market mentality
mixed market system
ex. farming, monopoly capitalism, market
1) scope of government
role of government in mixed market system
1) establish legal and institutional framework
2) allocate resources
3) regulation of trade
4) redistribution of income
5) macreoeconomic stability
goals of macroeconomic policy
1) economic growth
2) price stability (inflation and deflation)
3) economic security
4) equitable tax burden
problems of macroeconomic policy
1) goals may conflict (ex. inflation and unemployment)
2) disagreemnet over means
3) economic rationalization
demand curve
a schedule which shows the amount of a good that buyers are willing and able to purchase at each price during a specific time period
change in price
moves along the schedule, yielding a change in quantity demanded
changes/shifts in the demand curve
1) tastes and preferences
2) income
3) price of a related good
4) changes in expected prices
normal good
increase in income correspond with and increase in demand
inferior good
increase in income correspond with a decrease in demand
1) expect a rising price, demand increases
2) expect a falling price, demand decreases
related goods
complements vs. substitions
supply curve
a schedule which shows the amount of a good that sellers are willing and able to put on the market at each specific price during a specific time period
shifts in the supply curve
1) price of inputs (costs of production)
2) changes in technology
3) price of related goods
4) taxes and subsidies (taxes on suppliers increase costs while subsidies reduce costs of production)
movement along: caused by change in price of that particular good
ex. of supply shifts (?)
1) increased cost of production, shift in (increased price)
2) increased techonology, shift out
3) tax increase, decreased supply
1) position of res: no tendency for change
2) no surpluses or shortages
price ceiling
imposed below equilibrium (when there is a tendency to rise)
ex. to alter resource allocation: discourages production
ex. to promote equity: rent controls
1) typically results in shortages
2) need for new rationing system (other than price)
price floor
imposed above equilibrium
ex. maintain competition: keeps production upu
ex. equity: minimum wage
1) typically results in a surplus
2) need to get rid of surplus
micro/macro economic logic: minimum wage
1) micro: increase unemployment
2) macro: decrease unemployment
demand side of the product market
1) consumer sovereignty
2) consumer wants are given (no manufactured demand)
accepted sequence
1) consumer wants
2) reflected in the market
3) produced by business
revised sequence
1) business
2) consumer
--massive investments create incentives to manage demand
--growth of large coporations makes the management of demand necessary
--emergence of the affluent society makes the management of demand possible
first great merger wave
1) increase in capital/producing unit
2) increase in financial size of business
3) separation of ownership from control
4) multi-function firms, conglomerates
business response to competition
1) better product
2) buy up other companies, consolidate
3) favorable government legislation
4) bomb the competition
business and demand in the resource market
underlying assumption: labor is irksome + needs incentive
(universal assumption of human nature)
labor vs. labor powewr
labor is volitionable
acutal work=capacity to work (commodity fiction)
extraction of labor from labor power
1) incentives
2) disincentive
3) peer pressure
scientific management
1) Frederick Taylor
2) time and motion studies
3) removes skill, power, moves to capital (deskilling
4) humans interchangeable
households and supply in the resource market
1) industrial sabotage
2) stint: collective slowing down of pace
3) strike
4) legislation
5) violence (Ludlow, Colorado, 1914)
production possibilities curve
a snapshot picture showing all possible combinations of two goods that could be produced at 1)full employment and 2)maximum efficiency
shows opportunity cost, a consequence of choice
opportunity costs
1) choosing something is always measured in terms of what you gave up
2)costs of choosing among alternatives (limited resources)
assumptions of the ppc
1) 2 goods
2) resources are fixed in quantity and quality
3) techonology is constant
"bowed" shape
we use the most efficient/adequate goods first; cost increases as these are depleted
implications of the ppc
1) shows the maximum aount that could be produced given resources
2) downward slope shows resources are limited
3) bowed outward shows resources are not fully interchangeable (increasing opportunity costs)
points on and off the curve
fuzzy line vs. exact point
not working at comparitive advantage (vs. unemployment)
shifts in the ppc outward
1) increase in quantity of resources
2) increase in quality of resources
3) increase in techonology
ubiased shifts ppc
increase in techonology applicable to both goods
biased shifts
increase in technology applicable only to one good
does it make any difference what combination of goods we produce
capital leads to more goods
(if we produce at A now we will have less growwth in the future...vs. B)
what determines the mix of goods for a society
1) traditional
2) command
3) market
supply side waste
occurs when we operate inside the ppc due to under-employment; resources may be used but are not used efficiently
demand side waste (mostly labor, capital)
occurs when we operate inside the ppc due to failure to maintain full employment (not enough demand to keep people employed)