Flashcards
Econ Ch 1-5
Flashcards do conjunto (98)
- 1What is Economics?Studies the choices that individuals, businesses, government, and entire societies make as they cope with scarcity and the incentives
- 2What is the difference between micro and macro?Micro: choices of individuals and businesses
Macro: National and global - 3What 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? - 4What are goods and services?The objects that people value and produce to satisfy human wants
- 5What are the types of goods and services?Agriculture, manufactured goods and serives
- 6What are the factors of production?Land (rent), Labour (human capital), Capital (physical and funds), Entrepreneurship (controls all the other factors)
- 7What is self-interest?Choices that are best for you
- 8What is social-interest?Choices that are best for society (efficiency and equity)
- 9When are we efficient?When it is not possible to make someone better off without making someone worse off
- 10What is equity?Fairness
- 11What current topics illustrate self-interest and social interest?Globalization, info-age monopolies, global warming, economic stability
- 12A choice is always a _____Trade-off
- 13_____ is what you gainBenefit
- 14_____ is what you must give up to get somethingCost
- 15What is considered a rational choiceWhen net benefit=net cost
- 16What is marginal benefit?The additional satisfaction or utility that a person receives from consuming an additional unit of a good or service
- 17What is marginal cost?Opportunity cost of pursuing a incremental increase in an activity
- 18What is a positive statement?Checking against a fact
Ex. Government-provided healthcare increases public expenditures - 19What is a normative statement?Opinion that cannot be tested
Ex. Government should provide basic healthcare to all citizens - 20What is an economic model?Description of aspects of the economic world only including features for that purpose
- 21What is the production possibilities frontier?The boundary between those combinations of G+S that can be produced and those that cannot
- 22On the PPF, where is attainable, efficient, inefficient?
- 23What is production efficiency?If we cannot produce more of one good without producing less of another
- 24Why is the PPF curved?Resources are not equally productive in all activities
- 25The more we have of a good the ______ the marginal benefit?Smaller
- 26What is the optimum point of producitonMB=MC (when we cannot get more value for our resources)
- 27What causes economical growth?Technological change or capital accumulation
- 28What is the cost of economic growth?To grow research and development, and produce new capital, we must decrease our production or consumption
- 29What is a comparative advantage?A person has it in an activity if they can perform at a lower opportunity cost
- 30What is the absolute advantage?A person that is more productive
- 31What are markets?Any arrangement that enables buyers and sellers to get info and do business
- 32What is a competitive market?Many buyers and sellers, no single buyer or seller can influence the price
- 33What is the money price?The amount od money needed to buy a good
- 34What is the relative price?The ratio of its money price to the money price of the next best alternative good (opportunity cost)
- 35What is the difference between quantity demanded and demand?Demand: relationship between qty and money
Qty Demanded: How much is demanded at a particular point - 36What is the Law of Demand?Other things remainaing the same, the higher the price of a good, the smaller is the qty demanded
- 37What influences a change in quantity demanded?Substitution effect and income effect
- 38What is substitution effect?When the relative price of a G/S rises, people seek substitutes, so qty demanded decreases
- 39What 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
- 40What is willingness to pay?Smaller the qty, higher the price people are willing to pay --> marginal benefit
- 41When there is a change in demand what happens to the curve?It shifts left or right
- 42What are the six main factors that change demand?Price of related goods, expected future prices, income, expected future income, population, preferences
- 43In terms of related goods, what causes demand to increase?Substitute decreases
Compliment increases - 44If the price of a good is expected to rise in the future, current demand will ______?Increase
- 45When income increases, a normal good will ______ and an inferior good will ______?Increase, Decrease
- 46When income is expected to increases in the future, the demand will _____?Increase
- 47The larger the population, the _____ the demand?Higher
- 48If a preference increases, the demand will _______?Increase
- 49—Increase in demand
- 50—Increase in qty demanded
- 51What is the Law of Supply?The higher the price of a good, the greater the quantity supplied
- 52Producers will only produce a good if they can produce _____ or ____ than the MCAt or higher
- 53What 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
- 54If the price of oil increases the production will ______?Decrease
- 55If the production of a substitute decreases, supply will _____?Increase
- 56Compliments must be produced _____?Together
- 57If 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
- 58The larger the number of suppliers, the _______ the supply?Greater (Supply shifts right)
- 59An increase in technology causes a _____ in supply?Increase
- 60If a natural disaster occurs, the supply will ______?Decrease
- 61What 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 - 62When does equilibrium price occur?Qty D = Qty S
- 63Price regulates ____ and ____ plans.Buying and selling
- 64This is an example of a _____?Surplus
- 65What is a shortage?Anything below the equilibrium
- 66A surplus forces the price to go _____, whereas a shortage forces the price to go _____.Down, up
- 67If supply increases and decrease decrease, the equilibrium price will _____?Decrease, qty stays the same
- 68If demand increases and supply decreases, the equilibrium price will ____?Increase, qty stays the same
- 69If supply decreases and demand decreases, the quantity will _____?Decrease, price will stay the same
- 70If demand increases and supply increases, the quantity will _____?Increase, price will stay the same
- 71Responsiveness = ______?Elasticity
- 72How much does QD change when a price changes?It depends on the responsiveness of a QD to change a price
- 73What 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
- 74What is the formula for QD elasticity?%Change Qty avg
_________________
%Change P avg
or
Change Qty Change P
_______ / _______
Q1+Q2 P1+P2 - 75Why is price elasticity of demand always negative?Price and quantity move in opposite directions
- 76It is the ______ or ______ that reveals how responsive the quantity change has been to a price change.Magnitude or absolute value
- 77What is an example of something that is perfectly inelastic?Insulin, drugs
No matter how much it costs, people will still need to buy it - 78What type of elasticity is this?Perfectly inelastic, elasticity of 0
- 79When buyers have a large choice of options what type of elasticity is shown?Perfectly elastic, infinite price, horizontal
- 80What is unit elastic?When consumers are perfectly responsive to change, elasticity is 1, % Change Qty = % Change P
- 81When % Change Qty is greater than % change in Price.Elastic
- 82When % Change Price is greater than % change in Qty.Inelastic
- 83What 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
- 84The closer the substitutes for a good/service, the ____ elastic is the demand for the good/service.More
- 85Necessities such as food or housing generally have ______ demand.Inelastic
- 86The greater the proportion of income consumers spend on a good, the ______ is the elasticity of demand for that good.Larger
- 87The more time consumers have to adjust to a price change, the ____ elastic is the demand for that good.More
- 88At which point on the curve is the demand unit elastic?The Mid-Point
- 89All prices above the mid-point are _____ and all prices below the mid-point are _____.Elastic, inelastic
- 90What 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
- 91What is the formula for elasticity of supply?%Change Qty S
_________________
%Change P
or
Change Qty P1+P2
_______ X _______
Change P Q1+Q2 - 92When the supply is linear and passes through the origin the elasticity is _______?Unit elastic
- 93What are the two factors that influence the elasticity of supply?Resource substitution, Time frame for supply decision
- 94The easier it is to substitute among other resources used to produce a G/S, the _____ is its elasticity of supply.Greater
- 95The more time that passes after a price change, the _____ is the elasticity of supply.Greater
- 96What is momentary supply?The qty supplied immediatly following a price change, it is often perfectly inelastic (E=0)
- 97Short-run supply is ______ elastic.Somewhat (E<1)
- 98Long-run supply is _____ elasticMost (E>1)