Macro Test 1

Front 1

Microeconomics

Back 1

– decisions made by individuals, business firms, industries, and governments on a daily basis.

Front 2

Macroeconomics

Back 2

– deals with the broader issues of a nation; economic growth is a macroeconomic issue; aggregate

Front 3

Externality

Back 3

– a social cost; the exhaust out of a vehicle.

Front 4

Opportunity Cost

Back 4

– 1st priority and 2nd is what you give up to meet 1st

Front 5

Positive v. Normative

Back 5

Positive (what is) vs. Normative (what should be)

Front 6

Efficient market place

Back 6

– where the marginal benefit intersects the marginal cost; we will not purchase something unless the benefit outweighs the cost.

Front 7

3 things to know about economics

Back 7

What - are we doing it for
Whom - are we doing it for
How - are we doing it; production

Front 8

Negative Externality

Back 8

- Private benefit is greater than social benefit ; drug house in neighborhood analogy

Front 9

Positive Exteranilty

Back 9

- Social benefit is greater that private benefit

Front 10

Equity v. Efficiency

Back 10

-Eq. = fairness
-Eff. = How well resources are used and allocated; given the most output for given inputs

Front 11

Ceteris Paribus

Back 11

– holding equal value on all items; holding all items constant in order to make a purchase decision

Front 12

Production Process

Back 12

– turning resources into products and services that people want; the entire resource

Front 13

4 parts os Production Process

Back 13

-Entrepreneurship
-Capital
-Labor
-Land

Front 14

- Entrepreneurship

Back 14

- is how you manage your resources

Front 15

- Capital

Back 15

– all manufactured products used to produce other goods; specialized labor – personnel and equipment; analogy of putting a chain on a 15 speed bike … you need the right tool

Front 16

- Labor

Back 16

– both the mental and physical talents of people

Front 17

- Land

Back 17

– land in the usual sense; also, other natural resources used in production

Front 18

Allocated efficiency

Back 18

– the best result is based on the environment.

Front 19

Technological efficiency

Back 19

– using any combination as long as you use all your resources.

Front 20

Marginal benefit ...

Back 20

is the same as demand

Front 21

- Demand Curve

Back 21

– as $$$ rises, demand drops; characteristic is that the curve goes to the right and down.

Front 22

Determinants of Demand

Back 22

-Taste and preferences
-Income
-Prices of related goods
-Future prices

Front 23

o Inferior goods

Back 23

– goods related to demand declining and income increasing.
 Shifts to the left for superior goods if demand is going down
 Shifts to the right if demand is going down

Front 24

o Normal good

Back 24

– goods directly related, positively, to your income

Front 25

- Future prices

Back 25

– when a consumer expects a price increase they go all out and stock up

Front 26

Supply

Back 26

- As price increases, the quantity of supply increases or opposite; they (price and quantity) have to be moving in the same direction.

Front 27

Determinants of Supply

Back 27

- Expectation
- Price of other commodities
- Production of technology
- Cost of resources
- Taxes and Subsidies

Front 28

- Cost of resources

Back 28

- the more the cost of input the higher the price the less the supply.

Front 29

- Production of technology

Back 29

– how much output can be produced from given quantities.

Front 30

- Price of other commodities

Back 30

– if the price goes up your purchasing power goes up as long as you have stock in that product.

Front 31

- Expectation

Back 31

– the effects of future expectations effects the purchasing habits; price goes up tomorrow we buy heavy today.

Front 32

- Shortage

Back 32

– P is below equilibrium and Q demands exceeds Q supplied. Price ceiling leads to shortages; Katrina/ apt. analogy.

Front 33

- Surplus

Back 33

– P is over market equilibrium and Q supplied exceeds Q demanded. Price floor leads to a surplus; job analogy.

Front 34

Consumer/ Producer Surplus

Back 34

Consumer is always trying to push the P down and producer is always trying to push the P up; this is equilibrium.

Front 35

Public Goods

Back 35

is non-rival and non-excludable

Front 36

- Private goods

Back 36

– are excludable and rival, things no one can use at the same time. Red Bull analogy. While excluding this you take away from everyone else.

Front 37

Free Riders

Back 37

– people who don’t “pay their share” and use the same services.

Front 38

Common Properties

Back 38

– property that is shared; Edward’s Aquifer, stove, fridge, etc.

Front 39

Adverse Selection

Back 39

–producers trying to find the lowest risk

Front 40

Moral Hazard

Back 40

– tendency to take more risks if you had insurance

Front 41

Asymmetric information

Back 41

– one party having more info than the other; car losing value as it drives off the lot analogy

Front 42

- Private cost

Back 42

– things we use inside our use; gas, chips, drink

Front 43

- Social cost

Back 43

– things that society pays for; pollution Moral Hazard

Front 44

3 goals of Macroec

Back 44

- Low unemployment
- Low or stable inflation
- Economic growth

Front 45

- Gross Domestic Product (GDP)

Back 45

– sum of all final goods and services produced domestically within a given time period; 4 components.

Front 46

- Full employment equilibrium

Back 46

– it is at the natural rate of unemployment which fluctuates between 4-6%.