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14 Cards in this Set

  • Front
  • Back
Economics
Human behavior, flow of capital, no coordination but there is still order, production, distribution, consumption.
Theories
They contain refutable propositions--In economics they cannot be proven.
Scarcity and limited
If it is scarce it is limited and there is a demand for it.
The theory of consumer behavior
1. Constraints/opportunities
and 2. Tastes/preferences

influences our descisions to purchase various quantities of goods
Demand
Explains reularity of behavior among people who buy goods and services.
A Demand Curve shows...
The quantities of a good the consumers are willing to buy at different prices. Negative slope. price vs. quantity

As the price of a good increases, the quantity purchased decreases
Supply
Explains the regularity of behavior among people who produce goods and services

Supply descisions are driven by cost of production.

As the price of a good rises, the quantity suppliers are wiling to produce goes up.

positive slope
Four postulates
1. People have prefences
2. More is preferred to less
3. People are generally willing to substitute one good for another.
4. Marginal value falls as the quantity consumed increases
Postulate 1
People have prefences
Postulate 2
More is preferred to less
Postulate 3
3. People are generally willing to substitute one good for another.
Postulate 4
4. Marginal value falls as the quantity consumed increases/variety is the spice of life.
Total Value
a good X is the amount a person would be willing to give up of other goods to have all of the good X

Sum of Marginal Values
Consumer Surplus
=Total value - total expenditures