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25 Cards in this Set

  • Front
  • Back
What are some reasons for a shift in demand?
1. Income
2. Prices of related goods in consumption (substitutes, compliments)
3. Expected change in future prices (ex. gas)
4. # of buyers
5. Other non-monetary factors
Law of Demand
As Price increases, demand with decrease
Why the demand curve points down?
substitution, income effect, and law of diminishing marginal utility
Why the supply curce faces upwards?
Profit motives, and methods of production
What are some reasons for a shift in supply?
1. technological change
2. input prices
3. prices of related goods (ex. automobile companies, with different models, still use same materials)
4. # of suppliers
5. other non-monetary factors

*govt actions, weather, strikes, war, etc.
What is Market Equilibrium?
Where Quantity supplied equals Quantity demanded

(supply and demand curves intersect here)
2 different ways to measure national output
GDP - gross domestic, total market value of all goods and services produced in the domestic economy of a geographic border

GNP - gross national, total market value of all goods and services produced by the citizens of an economy
= C + I + G + ( X - M )

*exports raise GDP
*imports drop GDP

- not a measure of social welfare, only of production
GDP = c + i + g + (x-m)

what does each stand for?
Gross Domestic Product =

consumption (household sector)
investment (business sector)
govt spending (govt sector)
exports (foreign sector)
Final Goods vs. Value Added
Final Goods: you only count the final product, for ex. dont count steel, you would count the cars using the steel

Value Added: in each stage of production

**both eliminate double counting
What is economics?
The study of the allocation of scarce resources among competing uses so as to maximize satisfaction
the idea of scarce resources
problem - people's wants grow faster than resources
What are 4 resources?
Land (rent)
LAbor (wages)
Capital (interest)
Entrepreneurship (profit)
What are the differences between the 2 different branches of econ?
Micro - the parts (ex. industry decisions)

Macro - the whole (ex. looking at the U.S. economy, unemployment rates, inflation rates, etc.)
What are models?
they are a simplification of reality, and help us to understand what is happening, as well as predict for the future
What is Adam Smith's invisible hand?
the idea that individuals only acting in their self-interest, unknowingly promote the society's best interest
What are the assumptions made in the Production Possibilties Frontier?
- that there are 2 goods
- there's a given level of technology
- you start with a base of resources
- resources are transferable
- but not perfectly transferable
What three situations can you be in with the PPF?
Unattainable- outside/above the line on the graph, you need to increase technology or resources and grow economically

Attainable - on the line, you are at full production and efficiently working

Attainable - inside the graph, but not perfect, some are unemployed and you could be more efficient
What is the law of supply?
as price increases, producers will produce more than at lower prices

*because of profit motive and how they produce items
How do you measure the unemployment and employment rates?
unemployment = unemployed / labor force

employment = # employed / population
what are some causes for Unemployment?
it takes time to locate a job
there are not enough of the "right" jobs; mismatch of skills required by the jobs and what those people seraching can do
inadequate # of total jobs caused by poor overall economic performance (business cycle)
fluctuations in economic activity due to the change of the seasons