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53 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Where does international trade arise primarily from? |
Comparative Advantage |
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Export Markets |
When the market opens to free trade, international consumers are added to demand |
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Import Markets |
When the market opens to free trade, international consumers are added to demand |
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Tariff |
A tax levied on goods imported into a country Foreign producers with the lowest cost will import the most |
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Important Quota |
A specific limit or maximum quantity of a good permitted to be imported into a country during a given period Only foreign producers with permission may import regardless of costs |
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Elasticity |
A measure of the relative responsiveness of one variable to a change in another |
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Price Elasticity of Demand |
The ratio of the percent change in the quantity demanded to the percent change in the price Ed= %^Qd / %^P (Always negative so ignore the sign) |
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Percent Change in the Price Equation |
%^P = ^P / original P |
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Percent Change in Quantity Demanded Equation |
%^QD = ^Qd / original Qd |
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Midpoint Formula |
Ed =(^Qd / Ave Qd) / (^P / Ave P) Or Ed =[(Q2-Q1)] / [(Q1+Q2)/2] / [(P1-P2)] / [(P1+P2)/2] |
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Perfectly Elastic |
A tiny change in P causes an infinite change in Qd Ed = infinity |
Possible Price Elasticity Coefficients |
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Elastic |
%^Qd > %^P Flat Ed = 1 |
Possible Price Elasticity Coefficients |
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Unit Elasticity |
%^Qd = %^P Ed = 1 |
Possible Price Elasticity Coefficients |
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Inelastic |
%^Qd < %^P Steep Ed < 1 |
Possible Price Elasticity Coefficient |
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Perfectly Inelastic |
A huge change in P causes no change in Qd Ed = 0 |
Possible Price Elasticity Coefficient |
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Production Possibilities Frontier |
Curve that graphs all possible combinations of two given goods that an economy can produce |
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Total Revenue |
Money earned from selling goods and services; Not the same as profit TR = P - Q |
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Determinants of Price Elasticity of Demand |
Number of substitutes and elasticity move together Time and elasticity move together Proportion of income and elasticity move together Need and elasticity move opposite |
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Production Possibility Frontier Assumptions |
Economy produces only two goods The quantity of resources is fixed Technology is fixed Resources are identical |
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Constant Opportunity Cost |
Can measure changes in unemployment as point moves Left to Right = decrease Right to Left = increase Once full employment is attained, only way to increase the production of one good is to take resources away from the other |
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Price Elasticity of Supply |
Es = %^Qs / %^P Steep = Inelastic Flat = elastic When s is inelastic, ^D causes a big ^Pe When s is elastic, ^D causes a big ^Qe |
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Income Elasticity of Demand |
Ei is positive for normal goods and negative for inferior goods |
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Cross Elasticity of Demand |
Exy is positive for substitutes and negative for complements |
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Pre Tariff Imports Equation |
Qd - Qs |
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Post Tariff Imports Equation |
Qd1 - Qs1 |
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Law of Increasing Opportunity Cost |
As production of good increases, the opportunity cost of producing an additional unit rises |
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Opportunity Cost |
Number of units of the other good given up |
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Production Possibilities Frontier |
Curve that graphs all possible combinations of two given goods that an economy can produce |
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Total Revenue |
Money earned from selling goods and services; Not the same as profit TR = P - Q |
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Determinants of Price Elasticity of Demand |
Number of substitutes and elasticity move together Time and elasticity move together Proportion of income and elasticity move together Need and elasticity move opposite |
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Economic Growth |
Outward shift of increasing opportunity cost |
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Causes of Economic Growth |
An increase in available resources A technological improvement A change in regulation |
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Absolute Advantage |
The ability to produce more in a given time frame |
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Comparative Advantage |
The ability to produce at a lower marginal opportunity cost |
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Opportunity Cost of Good X Equation |
Quantity of Y / Quantity of X |
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Change in Total Revenue Equation |
TR2 - TR1 |
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Production Possibility Frontier Assumptions |
Economy produces only two goods The quantity of resources is fixed Technology is fixed Resources are identical |
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Constant Opportunity Cost |
Can measure changes in unemployment as point moves Left to Right = decrease Right to Left = increase Once full employment is attained, only way to increase the production of one good is to take resources away from the other |
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Price Elasticity of Supply |
Es = %^Qs / %^P Steep = Inelastic Flat = elastic When s is inelastic, ^D causes a big ^Pe When s is elastic, ^D causes a big ^Qe |
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Income Elasticity of Demand |
Ei is positive for normal goods and negative for inferior goods |
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Cross Elasticity of Demand |
Exy is positive for substitutes and negative for complements |
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Pre Tariff Imports Equation |
Qd - Qs |
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Post Tariff Imports Equation |
Qd1 - Qs1 |
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Law of Increasing Opportunity Cost |
As production of good increases, the opportunity cost of producing an additional unit rises |
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Opportunity Cost |
Number of units of the other good given up |
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Total Revenue and Elasticity |
As price falls and quantity rises what happens to total revenue depends on elasticity Ed > 1 P and TR move opposite Ed < 1 P and TR move together Ed = 1 Price change has no effect on TR |
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Qd |
Domestic consumption |
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Qs |
Domestic production |
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Qn |
No trade equilibrium |
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Net Welfare gain |
Triangle ABC |
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Gained PS |
PwBCPn |
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Lost PS |
PwACPn |
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Us Exports |
Qs-Qd |
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