Basic Macroeconomics Day 3 Lecture Flashcards
1
Q
Price Ceilings
A
- Price ceiling
- price controls
- rent control
2
Q
Laws that government enact to
regulate prices are called __________
A
price controls.
3
Q
are examples.
A
Price ceiling and price
controls
4
Q
keeps a price from
rising above a certain level. A
legal maximum price that one
pays for some good or service
A
Price ceiling
5
Q
Example of Price ceiling ____________
A
rent control
6
Q
Price Floor
A
- Price floor
- price supports
7
Q
is the lowest price
that one can legally pay for some
good or service
A
Price floor
8
Q
because they support a
price by preventing it from
falling below a certain level
A
Price supports
9
Q
Consumer Surplus and Producer Surplus
A
- Consumer surplus
- Producer surplus
- social surplus
10
Q
is the amount that individuals would have been willing to pay
minus the amount that is actually paid
A
Consumer surplus
11
Q
is the amount that a seller is paid for a good minus the seller’s
actual cost
A
Producer surplus
12
Q
The sum of consumer surplus and producer surplus is called the _________
A
social surplus
12
Q
In the Labor and Financial Markets
A
- In labor markets job seekers are suppliers of labor while firms and
other employers who hire labor are demanders for labor - in financial markets, ay individual or firm who saves contributes to the supply of money and anyone who borrows contributes to the demand for money
13
Q
- In labor markets job seekers are _____________ while firms and
other employers who hire labor are ______________
A
suppliers of labor
demanders for labor
14
Q
- in financial markets, ay individual or firm who saves contributes to the ___________ and anyone who borrows contributes to the _____________
A
supply of money
demand for money
15
Q
Shifts in Labor Demand
A
- Demand for output
- Education and training
- Technology
- Number of Companies
- Government Regulations
- Price and availability of other inputs
16
Q
- when demand for the good produced increases, both the
output price and profitability increase, hence producers will demand more labor to ramp up production
A
- Demand for output
17
Q
- well trained and educated workforce causes an increase
in the demand for that labor by employers. Increased levels of productivity within the workforce will cause the demand for labor to shift to the right. If the workforce is not well trained or educated, employers will not hire from within that pool, since they will need to spend a significant amount of time and money training that workforce. Demand for such will shift to the left
A
- Education and training
18
Q
- It depends if it will act as a substitute to or complement for labor.
- If it is a substitute, it replaces the need for the number of workers an employer needs to
hire, hence it will decrease the demand for labor - If it is a complement- it will increase demand for certain types of labor
- an example is word processing and increasing reliance on tech has decreased the demand
for typists in the work place but increased demand for IT and tech people
A
- Technology
19
Q
- An increase in the number of companies producing a given product will increase the demand for labor resulting in a shift to the right.
A decrease in the number of companies producing a given product will decrease the demand for labor resulting in a shift to the left.
A
- Number of Companies
20
Q
- complying with government regulations can increase or decrease the Demand for labor at any given wage
- For example a regulation that requires a specific profession to do a specific task will increase the demand for such profession. This Bars others from doing such task and it will decrease the demand for others.
A
- Government Regulations
21
Q
- If prices of other inputs fall, production will become more profitable and suppliers will demand more labor to increase
production
A
- Price and availability of other inputs
22
Q
Shifts in Labor Supply
A
- Number of Workers
- Required Education
- Government Policies
23
Q
- an increased number of workers will cause the supply curve
to shift to the right. - Increased number of workers can be due to several factors, such as immigration, increasing
population, aging population and changing demographics
A
- Number of Workers
24
Q
- the more education, the lower the supply.
A
- Required Education
25
Q
- Government policies that support rules that set high qualifications for certain jbs: academic training, certificates or licenses or experience and are made tougher, the number of qualified workers will decrease at any give wage
- When government subsidizes training or even reduce the required level of qualifications, such provisions would shift the supply curve to the right
- Policies that change the relative desirability of working versus not working also affect labor supply. For example government policies that extend the duration of unemployment benefits would discourage workers from seeking for work and hence would shift the supply curves to the left.
A
- Government Policies
26
Q
When No Shifting Will occur
A
- Change in salary will only lead to a movement along the labor demand and supply curves but it will not shift those curves
27
Q
Application: What Happened with The Labor market for
the Legal profession after the 2020 /2021 Bar
Examinations
A
- In the Philippines, the legal profession prescribes the highest standards of qualification that every year, the supreme court only allows less than 50% to pass the bar examinations. Before this, bar exam takers must pass the rigorous requirements of their respective law schools. This profession prescribes high standards such that even some in the most prestigious schools would take the bar exams at least 8 times before becoming a lawyer.
- This 2020/2021 bar however, in an effort to ease up entries into the legal profession, the bar chair asked the most basic questions that are essential in the legal profession.
- In effect this caused the highest passing rate in Philippine History at 72.2%
- In effect this increased the supply of lawyers.
- Graphically this means that the once prestigious profession is experiencing lower wages because of over supply
28
Q
Effect of technology on the demand for low skill
and high skill workers in the economy
A
- The introduction of new information technologies like computer and telecommunication networks in the office has affected low skill and high skill workers.
- From the perspective of employers, these new technologies are often substitute for low skill laborers like file clerks who used to keep file cabinets full of paper records of transactions and typists who type
these data. - However these same new technologies are complement to high skill
workers like managers, who benefit from the technological advances
by having the ability to monitor and access more information,
communicate more easily and juggle a wider array of responsibilities
29
Q
- These are disruptions of market equilibrium, a market adjustment
caused by a change in a demand determinant or a change in a supply determinant
A
Market Shocks
30
Q
- This is a finance term to shifts in our demand and supply curves
A
Market Shocks
31
Q
- _____ has been the greatest market shock in our century and has
affected everything from wages to weapons
A
tech
32
Q
is a counter balance to a social order that it has
always been in favor of the employers.
A
minimum wage
33
Q
- It increases the ________ part of the _________.
A
consumption
GDP equation
34
Q
Arguments for a minimum wage
A
- a minimum wage is a counter balance to a social order that it has
always been in favor of the employers. - While graphically and mathematically true that a minimum wage causes market inefficiencies, there is no economic sense to have underpaid and overworked employees.
- Employers must be also reminded that the existence of capital and markets is for the benefit of everyone, not only to a powerful few
- It increases the consumption part of the GDP equation.
- with higher wages, employees will be able to afford more goods and services. this increases the overall health of the economy as firms are encouraged to expand their respective productions to produce more goods and services.
- Just like as what Henry Ford did, he increased the basic salaries of his employees turning them into a new customer base for his cars.
35
Q
- In banking, the banks earn ________ by asking _______ to the _______that will become their respective ________ to the bank.
A
capital
money
public
deposits
36
Q
- The bank then _________ these deposits to businesses in need to
________ their businesses or to __________ their _________
A
loans out
operate
expand
capabilities
37
Q
How Banks Work
A
- In banking, the banks earn capital by asking money to the public that will become their respective deposits to the bank.
- in a sense, and in legal matters, the depositor is the bank’s creditor. It is as if the depositor loaned out his money to the bank to be spent on something else.
- And in return the bank will give interest to the depositor. This is why starting banks and even broke banks provide high interest rates to encourage people to deposit money to them
- The bank then loans out these deposits to businesses in need to
operate their businesses or to expand their capabilities
38
Q
Demand and supply in the Financial Market
A
- Those who supply financial capital through saving expect to receive a rate of return, while those who demand financial capital by receiving funds expect to pay a rate of return.
- The simplest example for this rate of return is called the interest rate
- let us take for example the demand and supply curves for credit cards
- The y axis shows the interest rate and the x axis is the quantity of money that is to be loaned
- note that in economics and finance, the price for the use of money of another is called an interest
- so in this market for credit cards, we use other people’s money to buy things
39
Q
- Those who ______ financial capital through _______ expect to receive a ________, while those who _______ financial capital by receiving ____expect to pay a __________.
A
supply
saving
rate of return
demand
funds
rate of return.
40
Q
- The simplest example for this rate of return is called the ________
A
interest rate
41
Q
Shifts in Supply and Demand in Financial Markets
A
- In financial markets, the participants usually decide when they prefer to consume goods: now or in the future
- this is called intertemporal decision making because it involves decisions across time
- In saving for retirement income in the present is greater than the needs, so this saving will be supplied to financial markets.
- When consumers and business have greater confidence that they will be able to repay in the future the quantity demanded of financial capital at any given interest rate will shift to the right
42
Q
- In financial markets, the participants usually decide when they prefer to consume goods: now or in the future
- this is called _____________ making because it involves decisions across time
A
intertemporal decision
