3759110
Description
Flashcards by Nastassja Celej, updated more than 1 year ago
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Created by Nastassja Celej
over 8 years ago
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| Question | Answer |
| What is Economics? | Studies the choices that individuals, businesses, government, and entire societies make as they cope with scarcity and the incentives |
| What is the difference between micro and macro? | Micro: choices of individuals and businesses Macro: National and global |
| What are the two big economic questions? | How do choices end up determining what, how, and for whom GS get produced? When do choices made in the pursuit of self-interest also promote the social interest? |
| What are goods and services? | The objects that people value and produce to satisfy human wants |
| What are the types of goods and services? | Agriculture, manufactured goods and serives |
| What are the factors of production? | Land (rent), Labour (human capital), Capital (physical and funds), Entrepreneurship (controls all the other factors) |
| What is self-interest? | Choices that are best for you |
| What is social-interest? | Choices that are best for society (efficiency and equity) |
| When are we efficient? | When it is not possible to make someone better off without making someone worse off |
| What is equity? | Fairness |
| What current topics illustrate self-interest and social interest? | Globalization, info-age monopolies, global warming, economic stability |
| A choice is always a _____ | Trade-off |
| _____ is what you gain | Benefit |
| _____ is what you must give up to get something | Cost |
| What is considered a rational choice | When net benefit=net cost |
| What is marginal benefit? | The additional satisfaction or utility that a person receives from consuming an additional unit of a good or service |
| What is marginal cost? | Opportunity cost of pursuing a incremental increase in an activity |
| What is a positive statement? | Checking against a fact Ex. Government-provided healthcare increases public expenditures |
| What is a normative statement? | Opinion that cannot be tested Ex. Government should provide basic healthcare to all citizens |
| What is an economic model? | Description of aspects of the economic world only including features for that purpose |
| What is the production possibilities frontier? | The boundary between those combinations of G+S that can be produced and those that cannot |
| On the PPF, where is attainable, efficient, inefficient? | |
| What is production efficiency? | If we cannot produce more of one good without producing less of another |
| Why is the PPF curved? | Resources are not equally productive in all activities |
| The more we have of a good the ______ the marginal benefit? | Smaller |
| What is the optimum point of produciton | MB=MC (when we cannot get more value for our resources) |
| What causes economical growth? | Technological change or capital accumulation |
| What is the cost of economic growth? | To grow research and development, and produce new capital, we must decrease our production or consumption |
| What is a comparative advantage? | A person has it in an activity if they can perform at a lower opportunity cost |
| What is the absolute advantage? | A person that is more productive |
| What are markets? | Any arrangement that enables buyers and sellers to get info and do business |
| What is a competitive market? | Many buyers and sellers, no single buyer or seller can influence the price |
| What is the money price? | The amount od money needed to buy a good |
| What is the relative price? | The ratio of its money price to the money price of the next best alternative good (opportunity cost) |
| What is the difference between quantity demanded and demand? | Demand: relationship between qty and money Qty Demanded: How much is demanded at a particular point |
| What is the Law of Demand? | Other things remainaing the same, the higher the price of a good, the smaller is the qty demanded |
| What influences a change in quantity demanded? | Substitution effect and income effect |
| What is substitution effect? | When the relative price of a G/S rises, people seek substitutes, so qty demanded decreases |
| What is income effect? | When the price of a G+S rises relative to people's incomes, people cannot afford all the things they want, so qty demanded decreases |
| What is willingness to pay? | Smaller the qty, higher the price people are willing to pay --> marginal benefit |
| When there is a change in demand what happens to the curve? | It shifts left or right |
| What are the six main factors that change demand? | Price of related goods, expected future prices, income, expected future income, population, preferences |
| In terms of related goods, what causes demand to increase? | Substitute decreases Compliment increases |
| If the price of a good is expected to rise in the future, current demand will ______? | Increase |
| When income increases, a normal good will ______ and an inferior good will ______? | Increase, Decrease |
| When income is expected to increases in the future, the demand will _____? | Increase |
| The larger the population, the _____ the demand? | Higher |
| If a preference increases, the demand will _______? | Increase |
| Increase in demand | |
| Increase in qty demanded | |
| What is the Law of Supply? | The higher the price of a good, the greater the quantity supplied |
| Producers will only produce a good if they can produce _____ or ____ than the MC | At or higher |
| What are the six main factors that change supply? | Prices of factors of production, prices of related goods, expected future prices, number of suppliers, technology, state of nature |
| If the price of oil increases the production will ______? | Decrease |
| If the production of a substitute decreases, supply will _____? | Increase |
| Compliments must be produced _____? | Together |
| If the price of a good is expected to rise in the future, supply of the good today ______ and the supply shifts to the ______? | Decrease, to the left |
| The larger the number of suppliers, the _______ the supply? | Greater (Supply shifts right) |
| An increase in technology causes a _____ in supply? | Increase |
| If a natural disaster occurs, the supply will ______? | Decrease |
| What is the difference between a change in supply and a change in quantity supplied? | Change in supply factors that shift the curve Change in quantity supplied is a change in price producers sell at |
| When does equilibrium price occur? | Qty D = Qty S |
| Price regulates ____ and ____ plans. | Buying and selling |
| This is an example of a _____? | Surplus |
| What is a shortage? | Anything below the equilibrium |
| A surplus forces the price to go _____, whereas a shortage forces the price to go _____. | Down, up |
| If supply increases and decrease decrease, the equilibrium price will _____? | Decrease, qty stays the same |
| If demand increases and supply decreases, the equilibrium price will ____? | Increase, qty stays the same |
| If supply decreases and demand decreases, the quantity will _____? | Decrease, price will stay the same |
| If demand increases and supply increases, the quantity will _____? | Increase, price will stay the same |
| Responsiveness = ______? | Elasticity |
| How much does QD change when a price changes? | It depends on the responsiveness of a QD to change a price |
| What is price elasticity of demand? | A unit-free measure of the responsiveness of the QD of a good to a change in its price, holding all other influences on buying plans constant |
| What is the formula for QD elasticity? | %Change Qty avg _________________ %Change P avg or Change Qty Change P _______ / _______ Q1+Q2 P1+P2 |
| Why is price elasticity of demand always negative? | Price and quantity move in opposite directions |
| It is the ______ or ______ that reveals how responsive the quantity change has been to a price change. | Magnitude or absolute value |
| What is an example of something that is perfectly inelastic? | Insulin, drugs No matter how much it costs, people will still need to buy it |
| What type of elasticity is this? | Perfectly inelastic, elasticity of 0 |
| When buyers have a large choice of options what type of elasticity is shown? | Perfectly elastic, infinite price, horizontal |
| What is unit elastic? | When consumers are perfectly responsive to change, elasticity is 1, % Change Qty = % Change P |
| When % Change Qty is greater than % change in Price. | Elastic |
| When % Change Price is greater than % change in Qty. | Inelastic |
| What are the three factors that influence elasticity of demand? | Closeness of a substitute, Proportion of income spent on the good, Time elapsed since price change |
| The closer the substitutes for a good/service, the ____ elastic is the demand for the good/service. | More |
| Necessities such as food or housing generally have ______ demand. | Inelastic |
| The greater the proportion of income consumers spend on a good, the ______ is the elasticity of demand for that good. | Larger |
| The more time consumers have to adjust to a price change, the ____ elastic is the demand for that good. | More |
| At which point on the curve is the demand unit elastic? | The Mid-Point |
| All prices above the mid-point are _____ and all prices below the mid-point are _____. | Elastic, inelastic |
| What is the elasticity of supply? | Measures the responsiveness of the qty supplied to a change in the price of a good, when all other influences on selling plans remain the same |
| What is the formula for elasticity of supply? | %Change Qty S _________________ %Change P or Change Qty P1+P2 _______ X _______ Change P Q1+Q2 |
| When the supply is linear and passes through the origin the elasticity is _______? | Unit elastic |
| What are the two factors that influence the elasticity of supply? | Resource substitution, Time frame for supply decision |
| The easier it is to substitute among other resources used to produce a G/S, the _____ is its elasticity of supply. | Greater |
| The more time that passes after a price change, the _____ is the elasticity of supply. | Greater |
| What is momentary supply? | The qty supplied immediatly following a price change, it is often perfectly inelastic (E=0) |
| Short-run supply is ______ elastic. | Somewhat (E<1) |
| Long-run supply is _____ elastic | Most (E>1) |
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