Basic Microeconomics: Chapter 1 & 2 Flashcards
It is defined as the study of the proper allocation and efficient utilization of
scarce productive resources to produce commodities for the maximum satisfaction of
unlimited wants and needs.
Economics
It deals with the behaviour of individual components such as
household, firm, and individual owner of production.
Microeconomics
It focuses on the behaviour of a
particular unit of the economy such as consumers, producers, and specific markets.
Microeconomics
It deals with the behaviour of economy as a whole with the view of
understanding the interaction between economic aggregates such as unemployment,
inflation and national income.
Macroeconomics
The initial discussions begin with how
growth and output are measured and how multipliers work. Labor, employment, and
inflation are included for long-term effects, as well as monetary, fiscal and trade policies.
Macroeconomics
You will often encounter terms like consumer’s behaviour, production
theory, cost and profit, and the market structures.
Microeconomics
it is a preposition about certain related variables that scientifically
explain a certain phenomenon.
Economic Theory
It tries to explain economic phenomena, to interpret why
and how the economy behaves and what is the best to solution-how to influence or to solve
these economic phenomena.
Economic Theory
It is essentially a simplified framework for describing the working of
the economy.
Economic Model
It is used to illustrate, demonstrate, and represent a theory or parts of it.
Economic Model
It
simplifies an explanation or description of a certain phenomenon, often employing graphs,
diagrams, or mathematical formulae.
Economic Model
It is a curve which shows various combinations of the
amounts of two goods which can be produces within the giver resources and technology/ a
graphical representation showing all the possible options of output for two products that
can be produced using all factors of production, where the given resources are fully and
efficiently utilized per unit time.
Production Possibility Frontier (PPF), Production Possibility Curve (PPC), or a
Production Possibility Boundary (PPB)
It pictures the economy as consisting of two groups-
households and firms-that interact in two market; goods and services market in which firms sell and households buy and the labor market in households sell labor to business firms or
other employees.
Circular Flow Diagram
Economic models can be presented in three forms, what are those?
The tabular, graphical and
mathematical or econometric.
This is economic model presented in table. Table has column and
rows forming a cell.
Tabular Model
In economics, tabular form of model is also known as, what?
Schedule
This is economic model presented using graph.
Graphical
There are several
types of graphs as discussed in your statistics class however in the field of economics the
most common form of graphical model is the line graph and it is called as, what?
Curve
This model is in the form of an equation.
When we say equation, it is a combination of numbers (coefficient or constant),
letters (variables) and an equal sign (=).
Mathematical or econometric model.
Mathematical and econometric model is commonly called as what?
Function
These are set of conditions
that need to satisfy to make the model valid.
Assumptions
What are the three assumptions that need to satisfy to make a model valid?
Ceteris paribus assumption; optimization assumption; Positive versus Normative Economic Statement.
It is a Latin word which means holding other variable
constant. In some books, it is also defined as remaining other things the same.
Ceteris paribus assumption
Ceteris paribus means, what?
holding other variable
constant
This
assumption is a nature of all economic models.
Ceteris paribus assumption
Every economic model goal is to optimize something.
Here, we either maximize or minimize something.
Optimization assumption.
This relates to what is.
Positive economics
It is an economic analysis that explains what happens in the economy and why, without
making any recommendations to economic policy, or in simple idea, it deals with how should
be verified by facts.
Positive Economics
It concerns itself with what should be.
Normative Economics
It is an
economic statement that makes recommendation to economic policy. This economic
statement is employed to make value judgments about the economy and suggests solutions
to economic problems. Instead of restricting its involvement on facts, it extends to the
specific actions that we should do to address the issues that depend on our values.
Normative Economics
Economic models can be used in three levels, what are those?
Descriptive Analytics, Predictive Analytics; Prescriptive Analytics
This step covers the description of economic model. We
commonly put emphasize on the highest and lowest point of the curves or schedule, the
relationship exist between the two or more variables, the slope and coefficient of the model.
Descriptive Analytics.
This step covers the forecasting of possible outcomes after
describing the economic model. Based on the relationship establish, we can identify the
possible effect of independent variable to dependent variable once change.
Predictive Analytics.
This step is the process of making recommendations and
suggestions to attain the main goals of economic model which is to optimize.
Prescriptive Analytics.
It is a depiction of how money and products are exchanged within an
economy.
Circular Flow Diagram
This might be used by a business to show how a specific series
of exchanges of goods, services and payments make up the building blocks of a given
economic system of interest.
Circular Flow Diagram
A basic model used in economics to show how an
economy functions.
Circular flow diagram
They consume the goods offered by the firms.
Household
It represents consumers
Household
It represent producers.
Firms
Their main function is to offer goods.
Firms
It indicates the maximum output combinations of two goods or services an economy can
achieve by fully using all available resources efficiently.
Production Possibilities Frontier
It occurs when a manager chooses between two alternative
ways of allocating business resources.
Opportunity Cost
If one action is chosen, the other
action is foregone or given up. There is a what?
Trade-off
It is is relationship between price and quantity demanded.
Demand
It is also defining as
the amount of goods and services that the consumer/ buyer are willing and able to buy or
consume in different prices at a particular time.
Demand
It states that as the price of the commodity increases,
quantity demanded decreases.
Law of Demand
It is the tabular presentation showing the price and quantity
demanded for a particular good.
Demand Schedule
It is the curve that shows relationship between price and quantity
demand. It is downward sloping which implies that there is negative relationship
between price and quantity demanded.
Demand Curve
This will happen if the price factor has been changed.
Movement along the Demand Curve
It is a mathematical model showing the relationship between price
and quantity demanded.
Demand Function
It occurs when the non-price factor changed.
Shifting of the Demand Curve
What are the non-price factors that affect the demand curve?
- Price of related commodity
- Outlook
- Income
- Number of consumer
- Taste and Preferences
It is one of non-price factor that affect the demand curve is
the price of related commodity which includes substitute goods and complementary goods.
PRICE OF RELATED COMMODITY-
Those commodities in which they perform the same function
and can satisfy the same needs and wants.
Substitute Goods
These are goods in which you consume it hand on hand, or consume it on
tandem.
Complementary goods
If people expect the price of good to increase,
they will want to buy it before the price increases. Conversely, if the people expect the price
decline, they will purchase less and wait for the decline.
OUTLOOK OR CONSUMER’S EXPECTATION
It is the amount of money that the individual or household receives from providing
the factors of production.
INCOME
Income is divided into two, what are those?
Disposable Income and Non-Disposable Income
It is part of income use by individual to purchase the goods and
services the individual or household needed. It is the one considered most by the
economist whether there will be changes in demand curve or not.
Disposable income
The
commodity is considered _______ if the demand for that good increase as the
income (disposable income) also increases.
Normal Good
It is part of income that is not use by household or individual
for their consumption. This is the part of income that is being saved for future
purposes. Sometimes, it became an investment of household or individual in the
future.
Non-disposable income
What are the non-price factors that affect supply curve?
- Productivity (Improvements in machines and production processes of a good or
service) - Inputs ( Change in the price of inputs required to produce the good or service.)
- Government Actions (Subsidies, Taxes and Regulations)
- Technology (Improvements in machines and production processes of a good or
service) - Outputs ( Price changes in other products produced by the firm)
- Expectations (outlook of future prices and profits)
- Size of Industry (Number of firms in the industry)
Income has _____ with the demand for normal
good while income has _________ with the demand for inferior
good.
Positive or Direct Relationship; Negative or Inverse Relationship
The commodity is considered _____ if the demand for that good decrease as the income of
individual increases.
Inferior Good
Demand is the relationship
between price and quantity demanded by all consumers in the market. If the number of
consumers increases, then demand will also increase. The demand curve will shift to the
right.
NUMBER OF CONSUMER OR CONSUMER’S POPULATION
It is the behavior of consumer which is affected by
weather, perception, information, occasion, what is in and others.
TASTE AND PREFERENCE OF CONSUMER-
If the changes occur is brought by price factors, what will change?
Quantity Demanded
If the changes occur is brought by non-price factors, what will change?
Demand
It is the relationship between price and quantity supplied.
Supply
It is the total amount
of goods and services that the sellers are willing and able to sell or produce.
Supply
Supply has _____ relationship with price.
Positive
It is tabular presentation of supply showing the price and
quantity supplied of a particular good ceteris paribus.
Supply Schedule
It states that as the price of the commodity increases, quantity supplied
also increases.
Law of Supply
It is a graph of supply showing the upward- sloping relationship
between price and quantity supplied. It is upward sloping which implies a
positive relationship between quantity supplied and price.
Supply Curve
It is a mathematical model in showing the relationship between
price and quantity supplies.
Supply function
This is only occur when the price of the subjected commodity changes.
Movement along the Supply Curve
It refers to the Improvements in machines and production processes of a good or
service
Productivity
Price changes in other products produced by the firm
Outputs
It includes subsidies, Taxes and Regulations.
Government Actions
Number of firms in the industry
Size of Industry
It refers to the outlook of future prices and profits
Expectations
It is the capacity of an input to produce output.
PRODUCTIVITY-
This refers to the raw materials or factors of production needed to produce a
certain product. It also includes the price of those raw materials.
INPUTS
This refers to the power of the government to intervene in the
market that will affect the supply.
GOVERNMENT ACTION
These are the incentive given by the government to motivate the producer to
provide more products in the market.
Subsidies
These are the power of the government to impose a certain percentage of amounts
to persons and property.
Taxes
These are the power of the government to impose some rule to control some
of political, administrative and economic activity done within the vicinity of the
state.
Regulations
It is the same as productivity. Remember, acquisition of this will lead to
productivity.
TECHNOLOGY
It comprises the price of other commodity produced by the firm. Firms nowadays do
not produce only one product line.
OUTPUT
It is the preview of the firms about the price of commodity they are selling in
the future. If firms expect the price of goods they produce to rise in the future, then they will
hold off selling at least part of the production until the price rises.
EXPECTATION
It refers to the number of sellers in the industry.
SIZE OF INDUSTRY
It refers to a group
of firms selling the same product.
Industry
It means that all forces in the market are in the balance.
Equilibrium
It is the point in the graph where the demand and supply meet or quantity
demanded is equal to quantity supplied (Qd = Qs).
Market
equilibrium
It is the price at which
quantity demand is equal to quantity supplied.
Equilibrium Price (P*)
It is the quantity
traded in the equilibrium price.
Equilibrium Quantity (Q*)
It is a situation in which quantity demanded is greater than quantity
supplied.
Shortage
It is a condition in which quantity demanded is less than quantity supplied.
Surplus
It is the minimum price set by the government in which the commodity
can be purchase.
Price Floor
It is the maximum price set by the government in which the
commodity can be purchase.
Price Ceiling
Income has a _____ relationship with normal goods; while, ______ relationship with inferior good.
positive, direct; negative, inverse
If the changes were brought by price factor, ______ will change. While, non-price factors, ______ will change.
quantity demand; demand
