Chapter 1 Flashcards
• What can Econ provide & not provide?
- Provides: Factual knowledge on issues
- Does not Provide: Final decision
• What is ‘‘Margine Analysis”? (MA)
- The analysis of marginal costs, to determine ways to increase profits.
• How is EM used?
- EM represents an ET or part of an ET, used to gain insight in the Cause & Effect of an econ phenomenon.
• How is ET used in policy?
- To analyze policy options by eval. possibilities that have not yet occurred.
• Why is “Voluntary exchange”(VE) an econ fundamental?
- The exchange is mutually beneficial. Laws can prohibit VE.
• What are externalities?
- The affected parties outside of an exchange. E.g. Farmers Poison ground water w/ pesticides & negatively affect the health of communities. communities are the externalities in this example.
What is used to interpret data?
• ET is usually needed to interpret data
• How is econ described as a discipline?
- Social > scientific
- Borrows modes of analysis from other fields
- Stats play greater role in analysis
- Statistical procedures are modified to fit econ needs
• Efficiency ≠ Equality in what way?
- US econ ↑ efficiency = greater separation of rich & poor
- Euro econ ↑ equality = ↓ econ pie size
• What did A.W. Phillips discover?
- Phillips curve
- Engineer turned economist
• Why is common sense not the best way to make econ decisions?
- Because sometimes the answer to a question is counterintuitive.
• How does Gov. limit econ flux?
- “Monetary Policy” (MP) = control of $ + interest rates
- “Fiscal Policy” (FP) = control over taxes & Gov. spending
- Market Econ = fluctuates “Boom & Bust” (B&B); includes Biz Cycle which has B&B also
- FP & MP sometimes fail due to unpredictable policy or market reactions
• What is an “Econ Model” (EM)
- EM = small scale version of an aspect of the economy. EM are expressed as Equations, Graph or words
• What is “Opportunity Cost?” (OC)
- The OC is a decision - the value of the next best alternative that must be given up because of that decision. e. g. Working instead of school
- The true cost is what is being given up. E.g. Working wages + college costs = True Cost of college.
• Why are there disagreement among economists?
- Econ = Social Sci. Some ppl feel competent to join public discussion
- Facts needed to solve disputes are sometimes unk.
• What is “Abstraction?”
- ignoring details to focus on most important aspect of a problem. e.g. the map analogy in chapter 1.
• Who rejects ET most often? & Why?
- Policy makers + Biz people
• Why?
- ET sometimes not seen as practical
• What is “Econ Theory?” (ET)
- Deliberate simplification of relationships to explain how those relationships work.
- Abstraction is used in ET for simplification of details.
- Theory ≠ hypothesis
- Theory = explanation of mechanism behind observed phenomena.
• Attempts to control supply and demand have often what effect?
- Usually the opposite of intention, e.g Rent caps Less $ For landlords and less property development = fewer consumer choices.
• How is Abstraction applied?
- Dependent on the question asked. Degree of abstraction depends on objective of analysis.
• Why is econ 101 eye opening?
- Can help answer Q’s like: what jobs are growing, Price fluctuations, Pollution, corp. oversight, econ histories.
• Why is it important to understand Econ principles?
- To make wiser decisions.
• What is economic “Tradeoff?” (maybe incorrect)
- The tradeoff between econ size & equality of National output.
- Decreased inflation = increased unemployment ≠ causation tho.
- Increased inflation = decreased unemployment ≠ causation
- Trade-off between inflation & unemployment
• What is “Correlation”?
- Variables move ↑or↓ together but ≠ causation
