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22 Cards in this Set
- Front
- Back
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Economics
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the study of how scarce resources are allocated
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microeconomics
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how individuals and firms make decisions
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Equity
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(equal) concerned with the distribution of resources
policy tradeoff between efficiency and equity |
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Principle of Opportunity Cost
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the opportunity cost of something is what you sacrifice to get it
explicity (pay out for) + implicit cost |
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The Marginal Principle
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Increase the level of an activity as long as its marginal benefit exceeds its marginal cost. choose the level at which the marginal benefit equals the marginal cost.
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Externality
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one person's actions impact a bystander
(cause for market failure-- government intervention) |
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Market Power
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the ability to influence market outcomes
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Real-Nominal Principle
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purchasing power v. actual face value
what matters to people is the real value of money or income-- its purchasing power-- not its "face" value |
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Models
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philosphers of behavior legitimized themselves through science and math by models---> economics
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Positive Statement
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descriptive, how things are (scientific)
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Normative Statement
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how things should be; policy advisor
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circular flow model
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explains interactions of individuals and how the economy works
Households, Firms; Goods and Services, Factors of production; (revenue, factor payments) (Households= Firms) |
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Stolper-Samuelson Theorem
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When the price of a good increases the factor intensive in the production (ex: unskilled and skilled labor, mexico and the US) of that good increases too
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demand
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the relationship between price and quantity demand, determined by the buyers
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Quantity Demand
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the amount buyers are willing to buy at a given price
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Law of demand
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ceteris parilous, when the price increases, quantity demanded falls
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ceteris Parilous
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all things being equal-- all other variables are fixed
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supply
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the relationship between price and quantity supplied, determined by the sellers
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quantity supplied
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the amount sellers are willing to sell at a given price
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Law of supply
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ceteris paribus, when the price increases the quantity supplied increases
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market equilibrium
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where quantity supplied equals quantity demanded
(market will adjust to reach equilibrium) |
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Law of supply and demand (invisible hand)
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the price of any good will adjust so that the quantity supplied equals quantity demanded
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