Chapter 1-3 Microeconomics

Front 1

Opportunity Cost

Back 1

put a value on the next best choice or alternative.

Front 2

Models

Back 2

Done in an abstract way (make things more simple).

Front 3

Causation vs. Correlation

Back 3

Causation- if "this happens," what will the result be?
Correlation- happen in a pattern

Front 4

Assumptions(help to make things more simple)

Back 4

Rationality- assuming with some consistency in behavior
1. People will act in their own self-interest
-people tend to learn from their mistakes
2. Marginal Decision Making-thinking @ the margin and picking the choice that will make me better off.

Front 5

Marginal Decision Making Examples

Back 5

Examples: Shopping and getting in the fastest line or just waiting. Gas prices and knowing when to get gas.

Front 6

What a society needs.....
Questions and Answers

Back 6

What to produce?.....Factors of Production
How to produce it (who will produce?) Efficiency in Production, investments, and etc.
For whom it is produced? Distribution-positive and normative
(Growth/Technology)
(Stability)

Front 7

Government Involvement

Back 7

1. Efficiency
2. Equity-involve normative judgment (discrimination/poverty).
3. Disaster-give out money to AID disaster areas
4. Economic Stability

Front 8

Demand

Back 8

A concept relating quantities of goods/services demanded to relative prices w/in a infinite period of time, ceteris paribus.

Front 9

Law of Demand

Back 9

There's inverse relationship btwn relative price(not accounting for inflation) & quantity demanded.

Front 10

Determinants of Demand

Back 10

Q=f(Income, complement & substitute goods, # of population, taste in perferences, EXPECTATION on price, weather

Front 11

Income

Back 11

Normal- buy more, when income rises, less when income decreases
Inferior- opposite

Front 12

Complements

Back 12

If x & y are complements, increase demand for y will cause increase demand for x.

Front 13

Substitutes

Back 13

Buy one means you don't buy the other.
How much are you willing to pay for something you may or may not really want? Example: Coke or pepsi

Front 14

Law of Supply

Back 14

There is a direct relationship btwn relative price and quantity supplied, ceteris paribus.
- ^P>^Qs, decrease P > decrease Qs

Front 15

Quantity Supplied(Qs)

Back 15

Qs=f(Px, resources, technology, # of sellers, tax/subsides, EXPECTATIONS)