Macro Midterm

Front 1

market

Back 1

a group of buyers and sellers of a particular good or
service.

Front 2

buyers

Back 2

as a group determines the demand for the product

Front 3

sellers

Back 3

as a group determines the supply for the product

Front 4

competitive market

Back 4

a market in which there are so many buyers
and so many sellers that each has a negligible impact on the market
price

Front 5

perfectly competitive market

Back 5

a market in which each
individual buyer and each individual seller has no impact at all on the
market price

Front 6

price takers

Back 6

another word for buyers and sellers

Front 7

perfectly competitive market

Back 7

what kind of market is the market for wheat

Front 8

not a perfectly competitive market

Back 8

what kind of market is the market for iphones

Front 9

quantity demanded

Back 9

the amount of a good that buyers are willing
and able to purchase

Front 10

demand schedule

Back 10

a table that shows the relationship between the
price of a good and the quantity demanded of the good (holding
constant everything else that affects the quantity demanded)

Front 11

demand curve

Back 11

a graph of the relationship between the price of a
good and the quantity demanded (holding constant everything else
that affects the quantity demanded)

Front 12

law of demand (true for most goods)

Back 12

other things equal, when the price of a good rises,
the quantity demanded of the good falls

Front 13

market demand for a product

Back 13

the sum of all the individual demands for the product

Front 14

market demand curve

Back 14

shows how the total quantity demanded of
a good varies as the price of the good varies

Front 15

if something happens that changes the quantity demanded at any given price

Back 15

when does the demand curve shift

Front 16

1. income 2. prices of related goods 3. tastes. 4. expectations 5. number of buyers

Back 16

5 variables that can shift the demand curve

Front 17

normal good

Back 17

a good for which, other things equal, an increase in income leads to an increase in demand

Front 18

inferior good

Back 18

a good for which, other things equal, an increase in income leads to a decrease in demand

Front 19

substitutes

Back 19

two goods for which an increase in the price of one leads to an increase in the demand for the other

Front 20

complements

Back 20

two goods for which an increase in the price of one leads to a decrease in the demand for the other

Front 21

quantity supplied

Back 21

the amount of a good that sellers are willing and able to sell

Front 22

supply schedule

Back 22

a table that shows the relationship between the price of a good and the quantity supplied of the good (holding constant everything else that affects the quantity supplied)

Front 23

supply curve

Back 23

a graph of the relationship between the price of a good and the quantity supplied (holding constant everything else that affects the quantity supplied)

Front 24

law of supply (true for most goods)

Back 24

other things equal, when the price of a good rises, the quantity supplied of the good rises

Front 25

market supply of a product

Back 25

the sum of the supplies of all sellers

Front 26

market supply curve

Back 26

shows how the total quantity supplied varies as the price of the good varies

Front 27

if something happens that changes the quantity supplied at any given price

Back 27

when does the supply curve shift

Front 28

1. input price 2. technology 3. expectations 4. number of sellers

Back 28

4 variables that can shift the supply curve

Front 29

market equilibrium

Back 29

a situation in which the market price has reached the level at which quantity supplied equals quantity demanded

Front 30

equilibrium price

Back 30

the price that balances quantity supplied and quantity demanded

Front 31

equilibrium quantity

Back 31

the quantity supplied and the quantity demanded at the equilibrium price

Front 32

surplus of a good

Back 32

a situation in which quantity supplied is greater than quantity demanded ("excess supply")

Front 33

shortage of a good

Back 33

a situation in which quantity demanded is greater than quantity supplied ("excess demand")

Front 34

law of supply and demand

Back 34

the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance

Front 35

when some event shifts the supply curve or the demand curve

Back 35

when does the market equilibrium change

Front 36

1. decide whether the event shifts the supply curve or the demand curve (or both) 2. decide in which direction the curve shifts 3. use the supply and demand diagram to see how the shift changes the equilibrium price and quantity

Back 36

three steps for analyzing changes in equilibrium

Front 37

willingness to pay

Back 37

the maximum amount that a buyer will pay for a good

Front 38

consumer surplus

Back 38

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

Front 39

the benefit a buyer receives from participating in a market

Back 39

what does consumer surplus measure

Front 40

marginal buyer

Back 40

the buyer who would leave the market first if the price were any higher

Front 41

the consumer surplus in a market

Back 41

what does the area below the demand curve and above the price measure

Front 42

cost

Back 42

the value of everything a seller must give up to produce a good

Front 43

produce surplus

Back 43

the amount a seller is paid for a good minus the seller's cost of providing it

Front 44

the benefit a seller receives from participating in a market

Back 44

what does producer surplus measure

Front 45

marginal seller

Back 45

the seller who would leave the market first if the price were any lower

Front 46

producer surplus in a market

Back 46

what does the area below and above the supply curve measure

Front 47

efficiency

Back 47

an allocation of resources is efficient if no one can be made better off without making someone else worse off

Front 48

efficiency

Back 48

an allocation of resources is efficient if it maximizes total surplus, where total surplus is the sum of consumer surplus and producer surplus

Front 49

total surplus

Back 49

consumer surplus + producer surplus =

Front 50

consumer surplus

Back 50

value to buyers - amount paid by buyers =

Front 51

producer surplus

Back 51

amount received by sellers - cost to sellers =

Front 52

total surplus

Back 52

value to buyers - cost to sellers =

Front 53

efficient

Back 53

the outcome of a perfectly competitive market is

Front 54

1. the supply of goods is allocated to the buyers who value them most highly 2. the demand for goods is allocated to the sellers who can produce them at the least cost 3. the quantity produced is the one that maximizes total surplus

Back 54

why is the outcome of a perfectly competitive market efficient (3)

Front 55

benevolent social planner

Back 55

an all-knowing, all-powerful, well-intentioned dictator

Front 56

the level attained by a perfectly competitive market

Back 56

a benevolent social planner cannot increase total surplus above

Front 57

governments

Back 57

what often intervenes in markets

Front 58

prices (rent, minimum wage)

Back 58

in some markets, there are controls on

Front 59

tax

Back 59

in other markets, what do governments do to sellers or buyers of a good

Front 60

when they believe that the market price of a good is unfair to buyers or sellers

Back 60

when do policymakers typically introduce controls on prices

Front 61

to collect revenues or to affect behavior

Back 61

why do policymakers levy taxes

Front 62

price ceiling

Back 62

a legal maximum on the price at which a good can be sold

Front 63

price floor

Back 63

a legal minimum on the price at which a good can be sold

Front 64

price floor

Back 64

a legal minimum on the price at which a good can be sold

Front 65

binding price ceiling

Back 65

what causes a shortage of a good in a competitive market

Front 66

ration the scarce goods among the potential buyers

Back 66

what must sellers do when there's a shortage of a good because of a binding price ceiling

Front 67

rent control

Back 67

example of a price ceiling

Front 68

binding price floor

Back 68

what causes a surplus of a good in a competitive market

Front 69

minimum wage

Back 69

example of a price floor

Front 70

at helping the poor

Back 70

where are price controls often aimed

Front 71

sellers respond to the lower price by reducing the supply and this causes a shortage

Back 71

problem with a binding price ceiling

Front 72

buyers respond to the higher price by reducing demand and this causes a surplus

Back 72

problem with a binding price floor

Front 73

subsidy

Back 73

alternative policy to a price control that avoids shortage or surplus

Front 74

costs the government money and so requires higher taxes

Back 74

problem with subsidy

Front 75

levy taxes

Back 75

how do government raise revenue to finance government expenditure

Front 76

tax incidence

Back 76

the manner in which the burden of a tax is distributed among the people who make up the economy

Front 77

by the size of the tax

Back 77

how much does a tax on sellers shift the supply curve upward

Front 78

smaller

Back 78

in the new equilibrium, the quantity of the good sold is __

Front 79

discourage

Back 79

taxes __ market activity

Front 80

more
less

Back 80

in the new equilibrium, buyers pay __ for the good, and sellers receive __

Front 81

share

Back 81

even though the tax is levied on sellers, buyers and sellers __ the burden of the tax

Front 82

the size of the tax

Back 82

how much does a tax on buyers shift the demand curve downward

Front 83

independent

Back 83

equilibrium quantity, price paid by buyers and price paid by sellers are __ of who sends the money to the government

Front 84

the slope of the supply curve and the slope of the demand curve

Back 84

how the burden of a tax (tax incidence) depends on

Front 85

the side that is less elastic

Back 85

which side of the market bears more of the burden of the tax

Front 86

exceed

Back 86

the losses to buyers and sellers from a tax __ the revenue raised by the government

Front 87

deadweight loss

Back 87

the fall in total surplus that results when a tax (or some other policy) distorts a market outcome

Front 88

they prevent buyers and sellers from realizing some of the gains from trade

Back 88

why do taxes cause deadweight losses

Front 89

raises

Back 89

a tax increase always __ the deadweight loss

Front 90

may raise or may lower it

Back 90

what does a tax increase do to tax revenue

Front 91

the slope of the supply curve and the slope of the demand curve

Back 91

what determines whether the deadweight loss from a tax is large or small

Front 92

greater

Back 92

the more elastic supply and demand, the __ the deadweight loss of a tax

Front 93

scarcity

Back 93

society has limited resources and so cannot produce all the goods and services people wish to have

Front 94

economics

Back 94

the study of how society manages its scarce resources

Front 95

not by an all-powerful dictator but through the combined actions of millions of households and firms

Back 95

in most societies, how are resources allocated

Front 96

1. how people make decisions 2. how people interact 3. how the combination of all those decisions in a society leads to outcomes

Back 96

what do economists study (3)

Front 97

principle 1

Back 97

people face trade offs

Front 98

if they understand the option they have available

Back 98

people are likely to make good decisions only __

Front 99

principle 2

Back 99

the cost of something is what you give up to get it

Front 100

opportunity cost

Back 100

what you must give up to get that item

Front 101

rational

Back 101

what do economists normally assume that people are

Front 102

principle 3

Back 102

rational people think at the margin

Front 103

optimum quantity

Back 103

the last one at which the marginal benefit exceeds the marginal cost

Front 104

principle 4

Back 104

people respond to incentives

Front 105

because rational people make decisions by comparing benefits and costs

Back 105

why do people respond to incentives

Front 106

principle 5

Back 106

trade can make everyone better off

Front 107

principle 6

Back 107

markets are usually a good way to organize economic activity

Front 108

marketing economies

Back 108

most countries that once had centrally planned economies have abandoned the system and are instead developing __

Front 109

principle 7

Back 109

governments can sometimes improve market outcomes

Front 110

1. to enforce property rights 2. to ensure competition

Back 110

why do market economies have institutions (2)

Front 111

environmental regulation and some form of redistribution

Back 111

what do most market economies have (2)

Front 112

principle 8

Back 112

a country's standard of living depends on its ability to produce goods and services

Front 113

4

Back 113

per-capita income in the U.S. equals about __ times per-capita income in Mexico

Front 114

40

Back 114

per-capita income in the U.S. equals about __ times per-capita income in Nigeria

Front 115

8

Back 115

over the past century, per-capita income in the U.S. has increased by a factor of __

Front 116

principle 9

Back 116

prices rise when the government prints too much money

Front 117

principle 10

Back 117

society faces a short-run trade-off between inflation and unemployment

Front 118

methodology of economics

Back 118

how economists try to understand the world

Front 119

scientific method

Back 119

what do economists use to try and understand economic phenomena

Front 120

models

Back 120

in what form do economists formulate their theories

Front 121

simplified description of the real world

Back 121

what are models

Front 122

microeconomics

Back 122

the study of how households and firms make decisions and how they interact in specific markets

Front 123

macroeconomics

Back 123

the study of economy-wide phenomena

Front 124

econometrics

Back 124

the development of statistical tools for analyzing economic data

Front 125

descriptive

Back 125

positive analysis is __

Front 126

positive

Back 126

a statement about how the world works and the consequences of a particular action

Front 127

prescriptive

Back 127

normative analysis is __

Front 128

normative

Back 128

a statement about how the world should be and about which action should be taken

Front 129

1. economists may disagree about the validity of alternative positive theories about how the world works 2. economists may have different values

Back 129

why do economists appear to give conflicting advice to policymakers (2)