Chap. 1 2 3 Flashcards

1
Q

A science that studies humans & societies use resources to produce goods & service to satisfy wants/needs

A

Economics

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2
Q

Statement that can be verified with empirical data

A

Positive Statement

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3
Q

Statement based on person’s
belief or value

cannot be verified

A

Normative Statement

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4
Q

Scientific method to construct
Economic Theory

A
  1. Hypothesis
  2. Define Terms / State Assumptions
  3. Test w/ data
  4. Accept / Reject / Modify theory
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5
Q

Economics studies how major components of an economy interact

A

Macroeconomics

e.g. Unemployment / Inflation / Gov policies / Int rates

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6
Q

Economics studies outcomes of decisions by people/firms

A

Microeconomics

E.g. Supply & demand / Cost & price of good / Market structure / Monopolies

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7
Q

4 Economic Resources

A
  1. Labour
    Human mental & physical effort
  2. Land
    Natural resource to produce goods & services
  3. Capital
    Plant/Equipment/Building/Tools for production
  4. Enterprise
    Human to innovate and take risks
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8
Q

Payments for Economic Resources

A
  1. Labour → Wages
  2. Land → Rent
  3. Capital → Interest
  4. Enterprise → Profit
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9
Q

The value of the
Next-Best Alternative
given up for
the other choice

A

Opportunity Cost

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10
Q

Products used by consumers to satisfy wants & needs
Only consumers buy

A

Consumer
Goods & Services

E.g. Pizza

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11
Q

PPE used to make goods for sale
Only firms & gov buy

A

Capital Goods

E.g. Machinery

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12
Q

2 Efficiencies

A
  1. Productive Efficiency
    Production of an output at Lowest Possible Avg Cost
  2. Allocative Efficiency
    Production of combination of outputs that Best Satisfies Society & Consumers’ Demands
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13
Q

5 Methods of
Allocative Efficiency

A
  1. First come, first served
  2. Lottery
  3. Sellers’ preference
  4. Gov decree
  5. Market
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14
Q

Difference of
If-No-Trade and If-Traded

A

Benefit of Trade

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15
Q

3 Fundamental Questions for all economic societies

A
  1. What to produce
  2. How to produce (tech)
  3. For Whom to receive (distribution)
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16
Q

4 Types of Economies

A
  1. Co-operative
    Foraging, egalitarian, no hierarchy/leader/army
    (Kibbutz)
  2. Command
    Totalitarian (elite group)
  3. Customary
    Traditional/Religious
    Landowners (royalty/aristocracy/church)
  4. Competitive
    Market
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17
Q

A graphical representation of combinations of
maximum output
that can be produced from available resources/tech

A

Production Possibilities Model

Assumptions:
1. Full employment
2. Best tech
3. Productive efficiency

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18
Q

Law of Increasing Costs

A

Economy’s
total production level of
particular item
Per Unit Cost of
additional unit

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19
Q

Heart of Economics
(3 factors)

A

Scarcity
Choice
Opportunity Cost

(COS)

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20
Q

Production Possibilities Model illustrates

A

Choice
Efficiency
Opportunity Cost
Unemployment

(CEOU)

21
Q

Mechanism that allows buyers/sellers to exchange products/services

22
Q

Relationship between various
prices & quantities that
consumers/suppliers are willing/able to buy/produce

A

Demand/Supply

23
Q

Motivation of consumers and producers in The Wealth of Nations - Adam Smith

A

Self-interest

24
Q

Most important determinant of Demand

25
Motivation of Supply
Profit
26
Demand/Supply Schedule contains
- **Price** per Case - **Quantity** Demanded/Supplied
27
Reasons of **Downward** Slopes of Demand Curve
1. **Income effect** Effect of a ***Price Change*** on ***Real Income***, and on ***Quantity Demanded*** 商品價格對消費者真實可支配收入及需求量的影響 2. **Subsitution effect** Effect of ***Change in Relative Prices*** of a Product and its Substitute 商品價格變化對其替代品需求量的影響
28
Cause of **Movement** along Demand/Supply Curve
Price Change
29
When 1. Prices **ABOVE** Equilibrium 2. Prices **BELOW** Equilibrium
1. Surplus 2. Shortage
30
**Determinants of Demand**: Cause change in Demand (Quantity Demanded at each price changes)
Factors ***Other than Price*** 1. Consumer **Preferences** 2. Consumer **Incomes** 3. Prices of **Related Products** *substitute/complimentary* 4. **Expectations** of Future (in Prices/Income/Availablity) Expected future $ **↑** → Sold **↑** now 5. **Population** Size / Income & Age Distribution *Assumed to be constant when drawn*
31
When income rises, consumers buy more __ products & buy less __ products
**Normal** Products ; **Inferior** Products
32
2 Types of **Related Products**
1. **Substitutes** Products can be substituted for each other. Product price **↑** → Substitute demand **↑** 2. **Complements** Tend to be bought together. Product price **↑** → Substitute demand **↓**
33
**Equilibrium** price & quantity are determined by
Interaction between buyers & sellers
34
2 Equilibrium Outputs
Quantity Supplied & Quantity Demanded
35
**Determinants of Supply**: Cause change in Supply (Quantity Supplied at each price changes)
1. **Prices** of **Resources** Resource $ **↑** → Supply **↓** 2. Gov **Taxes & Subsidies** Tax **↑** → Supply **↓** Subsidy **↑** → Supply **↑** 3. **Technology** Tech **↑** → Production Cost **↓** & Supply **↑** 4. Prices of **Substitutes in Production** Product $ **↑** → Supply of Sub in Production **↓** 5. Future **Expectation** of Suppliers Expected future $ **↓** → Supply **↑** 6. **Number** of Suppliers Suppliers # **↓** → Supply **↓**
36
When Demand/Supply change together, the effect of Price/Quantity is
Indeterminate or Inconclusive
37
When Demand ↑ & Supply ↑ Price __ Qty __
Price **?** Qty**↑**
38
When Demand ↓ & Supply ↓ Price __ Qty __
Price **?** Qty**↓**
39
When Demand ↑ & Supply ↓ Price __ Qty __
Price**↑** Qty **?**
40
When Demand ↓ & Supply ↑ Price __ Qty __
Price**↓** Qty **?**
41
3 Problems with Markets
1. Markets adjust NOT quickly 2. Markets results NOT equitable 3. Competitve Markets NOT for some goods/srv.
42
Price Control
Gov regulates $ incl. 1. **Price Ceiling** 2. **Price Floor** 3. **Quota** 4. **Taxes** *incl. Carbon tax* 5. **Subsidies** ***per unit produced*** *promote economic/social policy*
43
Price Ceiling 1. __ equil. $ 2. cause
1. **<** equil. $ 2. **Shortage** & black market E.g. Rent
44
Price Floor 1. __ equil. $ 2. cause
1. **>** equil. $ 2. **Surplus** & gov buys it E.g. min. wage/agricultural
45
How to Allocate Scarcity/Shortage
1. Market 2. Lottery 3. First come, first serve 4. Preference of producers 5. Rationing by gov
46
Surpluses will be
1. **Stored** 2. **Converted** 3. Sold abroad (**Dumped** at low $) 4. **Donated** 5. **Destroyed** *SCDDD*
47
Quota 1. __ equil. $ 2. cause
Restricting production output 1. **>** equil. $ 2. Price **↑** without Surplus
48
How 1. Taxes 2. Subsidies impact supplies
Supplies are 1. **↓** by Taxes ⇒ Supp Crv **↑** 2. **↑** by Subsidies ⇒ Supp Crv **↓**