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;
54 Cards in this Set
- Front
- Back
|
economics
|
social science that studies the choices we make as we cope with scarcity and the incentives that influence and reconcile our choices.
|
|
|
scarcity
|
available resources are insufficient to satisfy wants
|
|
|
4 categories of resources
|
land
labor capitol entrepreneurship |
|
|
incentive
|
reward ot penalty that encourages or discourages an action
|
|
|
positive analysis
|
factual
|
|
|
normative analysis
|
judgement
|
|
|
opportunity cost
|
value of best alternative
|
|
|
sunk cost
|
inevitable/irreversible cost
|
|
|
marginal benefit (MB)
|
benefit of one additional unit of a good
MB decreases as Q increases |
|
|
marginal cost (MC)
|
cost of an additional unit
MC increases as Q increases |
|
|
absolute advantage
|
produce more in same amount of time OR produce same in less time
|
|
|
comparative advantage
|
produced at lower cost
|
|
|
2 rules of advantage
|
1) If one person has comparative advantage in one task, the other will have comp advantage in other task.
2) NO ONE can have comp advantage in everything. |
|
|
production possibility frontier (PPF)
|
graph of maximum output that can be produced
|
|
|
characteristics of individual PPF
|
1) negative slope
2) magnitude of the slope reflects the MC of "x" |
|
|
characteristics of economy-wide PPF
|
1) negative slope
2) maginitude of slope reflects MX of "x" 3) slope gets steeper as "x" increases |
|
|
production efficiency
|
produce combination of goods at lowest cost
|
|
|
allocative efficiency
|
resources are used where they are most highly valued
|
|
|
shift in PPF
|
anything that changes either the level of resources OR anything that changes the productivity of resources
|
|
|
demand
|
maximum quantity a consumer is willing and able to purchase at various prices
|
|
|
law of demand
|
as Q increases, D decreases and vice versa
|
|
|
changes in demand
|
1) changes in income
2) change in prices of "related goods" 3) changes in expectations 4) change in # buyers 5) changes in tastes or preferences |
|
|
normal good
|
good where D rises when income rises and D falls when income falls
|
|
|
inferior good
|
good where D rises when income falls and D falls when income rises (ex. Ramen noodles)
|
|
|
substitutes in consumption
|
goods that are used in place of one another (ex. Thin Mints and Oreos)
|
|
|
compliments in consumption
|
goods that are used together )ex. milk and cookies)
|
|
|
supply
|
maximum quantity a seller is willing and able to sell at various prices
|
|
|
law of supply
|
positive relationship between price and quantity supplied
|
|
|
changes in supply
|
1) change in input prices
2) change in prices of related goods 3) expectations 4) change in # of sellers 5) change in technology |
|
|
substitutes in production
|
goods that can be produced with same resources (ex. corn and soybeans)
|
|
|
compliments in production
|
goods that are produced together; biproducts (ex. beef and leather)
|
|
|
surplus
|
Q supplied > Q demanded
|
|
|
shortage
|
Q supplied < Q demanded
|
|
|
equilibrium
|
Q supplied = Q demanded
|
|
|
elasticity
|
responsiveness
|
|
|
price elasticity of demand
|
measure of the responsiveness of consumers to a change in price
|
|
|
inelastic demand
|
Ed < 1
|
|
|
elastic demand
|
Ed > 1
|
|
|
"unit elastic"
|
E = 1
|
|
|
determinants of Ed
|
1) availability of substitutes
2) proportion of income 3) time |
|
|
total revenue
|
price x Q demanded
|
|
|
elasticity and revenue
|
when D is elastic, revenue follows Q demanded.
when D is inelastic, revenue follows P. |
|
|
cross-price elasticity
|
cpe > 0 : substitutes in consumption
cpe < 0 : compliments in consumption |
|
|
determinants of Es
|
1) availability of substitutes inputs
2) time |
|
|
consumer surplus
|
MV-price
|
|
|
producer surplus
|
price-MC
|
|
|
dead weight loss
|
decrease in CS and PS as a result of inefficient level of production
|
|
|
equity
|
fairness
|
|
|
symmetry principle
|
people in similar situations should be treated similarly
|
|
|
utilitarianism
|
achieve the greatest happiness for the greatest number
|
|
|
maximum principle
|
make the poorest person as well off as possible
|
|
|
excise tax
|
per unit tax
|
|
|
tax incidence
|
division of the burden of a tax between buyer and seller
|
|
|
quota
|
upper limit on Q of a good that can be sold
|
