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28 Cards in this Set
- Front
- Back
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Scarcity |
Limited+alternative uses what is ex |
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What is economics |
Economics is a social science that studies how individuals or groups of individuals choose to allocate and utilize scarce resources to produce goods and services to maximize current and future consumption. |
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3 fundamental questions |
What to produce How/how much to produce For whom to produce |
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Modeling economic human behavior |
-law of large numbers:averages -preferences tend to be stable for long periods of time -economics transactions are subject to certain logical regularities |
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Transactions are subjected to certain logical regularities- |
Decision makes respond to incentives Transactions must add up |
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Economic cost |
Explicit + implicit
Implicit: missed benefit - avoided cost |
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Market |
Made up of buyers and sellers with the possibility of mutually beneficial gains from trade. |
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Elements of a market |
1.) rational decision makers a)self interested buyer/seller b)buyer/seller respond to incentive 2.) voluntary exchange a)not "free" (unregulated) exchange |
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Properties of a well behaved market |
-Lack of market power: competitive -property rights enforced and defined -no externalities(+/-) -information available -trust
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Market and govt are... |
Complements |
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Self adjustment is not necessarily... |
Instantaneous |
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Price coordinates the... |
Allocation and utilization of economic activity. |
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Equilibrium vs efficiency |
Equilibrium: Qd=Qs or Prb=Prs Efficiency: MB=MC or P=MC |
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Adding up... |
Accounting adding up: amt bt=amt sld Behavioral adding up: equilibrium: mb=mc |
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Cross-price elasticity of demand Exy |
(%changeinDx)/(%changeinPy) >0: substitute <0: complement |
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Income elasticity of demand |
(%changeinDx)/(%changeincome) >0: normal good (everything) <0: inferior (ramen) |
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Tax: who bears the burden? |
Both. Depends on Es and Ed |
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Tax graphs |
Back (Definition) |
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Perfect elastic and inelastic graphs |
Back (Definition) |
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Price ceiling |
Back (Definition) |
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Quota |
Back (Definition) |
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Price floor |
Back (Definition) |
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Scientific method |
A systematic approach to discovering regular patterns of behavior |
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OHEV (Theory and empirical) |
Observation Hypothesis Experimentation Verification |
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Properties of a model |
Necessarily incomplete:blind spots/tunnel vision Dynamic Generalize |
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Tax graphs |
Back (Definition) |
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Perfect elastic and inelastic graphs |
Back (Definition) |
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Tax revenue graphs |
Back (Definition) |
