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50 Cards in this Set
- Front
- Back
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What is Economics? |
it is about people, and how they make choices, employ resources and and cooperate with one another to overcome scarcity. |
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What is the difference between Microeconomics and Macroeconomics? |
Micro: individual sand businesses and how their choices interact in markets and influence governments. Macro: performance of the notional economy and the global economy. |
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What are the two big questions in economics? |
1. How do choices end up determining what, how and for whom goods and services are produced? 2. Do choices made in the pursuit of self-interest also promote social interest? |
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What are the 4 factors of production? |
Land, Labour, Capital, and Entrepreneurship |
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What is Land? |
natural resources involved in production |
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What is labour? |
human mental and physical contributions to the production of goods and services
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What is Capital? |
machinery and equipment involved in production |
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What is Entrepreneurship? |
human resources involved in the organization of land labour and capital in production |
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What is market capitalism? |
economic system in which individual own land and capital and are free to buy and sell in the market. |
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What is centrally planned capitalism? |
economic system in which the government owns all the land and capital, directs workers to jobs and decides what, how, and for whom to produce |
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What is mixed economy? |
market capitalism with government regulation |
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What is opportunity cost? |
highest-valued alternative, that must be given up to get something. |
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What is a positive statement? |
statement about what is |
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What is a normative statement? |
statement about what ought to be |
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What is the PPF |
the boundary between the combinations of goods and services that can be produced and those that cannot. |
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What do the points on the PPF represent? |
maximum feasible combinations of capital goods and consumer goods that the economy can produce given the full utilization of all available resources and technology. |
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What does a movement down and along the PPF represent? |
x more consumer goods are produce at the cost of sacrificing y capital goods. |
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What does a movement up and along the PPF represent? |
x more capital goods are produced and the cost of sacrificing y capital goods |
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what is production efficiency? |
when we produce goods and services at the lowest possible cost. |
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What is the ration of opportunity cost? |
decrease in the quantity produced of one good divided by the increase in the quantity produced of another good. |
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What causes shifts in the PPF |
change in resources or labour |
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What is allocative efficiency? |
when goods and services are produced at the lowest possible and in quantities that provide the greatest possible benefit |
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What is a comparative advantage? |
can perform an activity at a lower opportunity cost then anyone else. |
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What is absolute advantage? |
outperforms and is more productive than others (production per hour) |
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What are property rights? |
the social arrangements that govern the ownership, use, and disposal of anything that people value. |
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What is quantity demanded? |
amount consumers plan on buying |
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What is demand |
entire relationship between the price of a good and the quantity demanded for that good. |
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What happens to the quantity demanded when the price of a commodity increases? |
movement up and along the demand curve |
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What are the 6 other variables related in demand? |
Price of other related commodities Expected future prices Consumer preferences Population Income Expected future income |
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What would cause demand to decrease? (shift left in curve) |
price of substitute falls price of compliment rises expected future price falls income falls expected future income fall population decreases consumer preference decreases |
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What would cause the demand to increase? (shift right in curve) |
price of substitute rises price of compliment falls expected future price rises income rises expected future income rises population rises consumer preference rises |
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What is supply? |
quantity that producers are willing to make available at each price. |
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What happens to the quantity supplied when the price of a commodity increases or decreases |
also increases/decreases |
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Why can the supply curve be interpreted as a "minimum-supply-price" curve? |
it shows the lowest price a seller is willing to sell at. |
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What are the 5 other variables involved in supply? |
Cost of factors of production The price of other related commodities Expected future price Number of firms in the industry Technology |
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What would cause supply to decrease? |
price of production increases price of substitute increase price of a compliment falls expected future price rises number of firms decrease technology decreases production |
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What would cause the supply to increase? |
price of production decreases price of a substitute decreases price of a compliment increases expected future price decreases number of firms increases technology increases production |
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When does market equilibrium occur? |
when the quantity demanded is equal to the quantity supplied. |
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What does a price exceeding the market equilibrium price mean? |
There is excess supply. (quantity supplied exceeds the quantity demanded) |
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How do firms respond to an excess in supply? |
lowering the price until market equilibrium is reached. |
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What does a price below the market equilibrium mean? |
Shortage in supply. (quantity demanded exceeds quantity supplied) |
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What happens when there is a shortage in supply? |
Consumers competing for the product bid up the price until market equilibrium is achieved. |
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How does an increase in demand impact market equilibrium? |
excess demand is created and the price rises. |
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How does a decrease in demand impact market equilibrium? |
excess supply is created and the price falls. |
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How does an increase in supply impact market equilibrium? |
excess supply and the price falls. |
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How does a decrease in supply impact market equilibrium? |
excess demand is created and the price rises. |
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How does a simultaneous increase in demand and supply impact market equilibrium? |
equilibrium quantity will increase. |
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How does a simultaneous decrease in demand and supply impact market equilibrium? |
equilibrium quantity will decrease. |
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How does an increase in demand and a decrease in supply impact market equilibrium? |
equilibrium price will increase. |
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How does a decrease in demand and an increase in supply impact the market equilibrium? |
equilibrium price will decrease. |
