Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
13 Cards in this Set
- Front
- Back
|
what are the objectives for policy making?
|
efficiency (producing what people want at low cost), equity (horizontal, everyone in the same status is treated equally vs vertical: everyone gets treated equally relative to status), growth, stability
|
|
|
production is a means for consumption
|
memorize!!
|
|
|
how can you expand PPF?
|
technology, trade, and knowledge.
|
|
|
what are diminishing returns?
|
costs more to make more (at the margin)
|
|
|
price taker
|
an individual not having an impact on the market
|
|
|
when elasticity is >1, =1, <1
|
Very elastic, unit elastic, inelastic. In the long run, most elasticities are >1
|
|
|
does inflation affect one price or many prices? And how does it happen? Who is it worse for?
|
monetary phenomenon that occurs across the board (all prices rise). Result of too much money floating around. When more money is printed, we, have more money to pay for something we would have valued at the amount we had before. The people with less money have to come up with more to buy the good.
|
|
|
What is the cost-price spiral theory? What’s the problem with it?
|
a rise in price of one good, leads to inflation and all prices rise. It confuses relative prices. If oil goes up: relative price of everything else goes up (can’t produce as much if you want the same quantity of oil). But nominal price (how much time/money it takes to get an individual good) stays the same.
|
|
|
where do gains from trade come from? (a welfare analysis)
|
from two people putting different values on the same good (the difference between their values is the wealth created...price distributes the gains)
|
|
|
role of prices
|
divy up gains from trade, and provide necessary knowledge o know how much of a good to produce, ensure that those who value it, and are able to get it the most, do get it, and that those who can produce it for the least costs do so.
|
|
|
what is the option value?
|
the value you get from yet unknown uses of it, fwhich cold support two sides of a decision. Not a trump card for making a decision, so we must use something else (prices!)
|
|
|
why is emphasizing efficiency important?
|
it forces us to make the costs of our beliefs explicit. 2. Efficiency assesses values as only those that are expressed by people’s actions (it only relies on revealed preferences)
|
|
|
what is the present value of net benefits
|
1. Thus, the present value of net benefits is the sum of net benefits in the current period, plus the discounted value of all future benefits
|
