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Econ 201 > Chapters 1 -5 > Flashcards

Chapters 1 -5 Flashcards

1
Q

Production possibilities boundary

A

The boundary that shows the maximum amount of how much of something can be made vs another with a certain amount of resources

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2
Q

Factors of production

A

Land
Labour
Capital

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3
Q

Opportunity cost is the price of ___?

A

the next best option

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4
Q

List the four key economic problems

A

What is produced and how
What is consumed and by whom
Why are resources sometimes idle
Is productive capacity growing

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5
Q

Why are free markets self organizing

A

When individual consumers and producers peruse self interests, collective outcome is coordinated

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6
Q

What are the three decision makers in any economy

A

Producers
Consumers
Government

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7
Q

Two characteristics of production?

A

Specialization

Division of labour

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8
Q

Globalization

A

The increased importance of international trade (loose definition)

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9
Q

The three pure types of economic systems

A

Traditional
Command
Free market

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10
Q

Governments intervene to___

A

Correct market failures
Provide public goods
Offset the effects of externalities

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11
Q

Normative statement

A

Value judgment

- what ought to be (this should be this way)

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12
Q

Positive statement

A

A statement of fact

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13
Q

Theory’s Include

A

variables
assumptions
predictions

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14
Q

Correlation vs Causation

A

Correlation: related movements

  • Positive: x increases when y decreases
  • Negative: inverse
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15
Q

Real Income

A

The Buying power of income

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16
Q

Quantity demanded and Price are___ related

A

Negatively

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17
Q

Price change causes a shift ____ the demand curve

A

Along

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18
Q

A change in variables other than income will cause the demand curve to

A

shift to a new position

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19
Q

What factors determine the quantity demanded of a good

A 
Consumer income 
Prices of related products 
consumer tastes 
population 
significant changes in weather
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20
Q

Quantity supplied

A

the quantity that firms are willing to offer for sale

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21
Q

Quantity supplied and price

A

positively related

22
Q

Variables that cause a shift in the demand curve

A 
Prices of inputs 
number of suppliers 
taxes or subsidies 
Tech
Significant changes in weather
Prices of other products
23
Q

Market Equilibrium

A

Every buyer finds a seller and every seller finds a buyer

24
Q

Increase in supply and equilibrium

A

Increases quantity and decreases price

25
Q

Decrease in supply and equilibrium

A

Rise in price and fall in quantity

26
Q

Increase in demand and equilibrium

A

Increase in both price and quantity

27
Q

Decrease in demand and equilibrium

A

Decreases in price and in quantity

28
Q

Elastic demand

A

When demand is responsive to price

29
Q

Perfectly elastic vs Perfectly inelastic demand curves

A

PE: horizontal
PIE: Vertical

30
Q

In the long run, demand is more___

A

elastic

31
Q

factors that affect elasticity of demand

A

availability of substitutes
consumer budget
Small fraction of budget: less elastic

Large portion : more elsatic

32
Q

Unit elastic

A

Revenue is constant as the relative change in price has the same effect on quantity

33
Q

When is total expenditure at a maximum?

A

When demand elasticity is = 1

34
Q

What is excise tax?

A

the tax on the sale of a particular product

35
Q

Tax incidence

A

Who bares the cost of an excise tax?

36
Q

Explain tax incidence

A

the excise tax cost is distributed between consumers and producers based on price elasticity of demand

37
Q

Normal Goods

A

Income elasticity that is positive and less than 1
- necessity item
Products for which the income elasticity is positive and larger than 1
- Luxury good

38
Q

Inferior goods

A

Income elasticity of demand less than 1

39
Q

Complement goods have cross elasticity ____ than 0

A

smaller

40
Q

Substitute goods have cross elasticity of demand ____ than 0

A

larger

41
Q

Price floor

A

Minimum permissible price that can be charged

42
Q

Price floor leads to excess___

A

supply (set above the eq)

43
Q

Price ceiling

A

Maximum price that can be charged

44
Q

Price ceiling causes excess___

A

demand

45
Q

price ceilings can lead to…

A

Black markets

46
Q

Economic surplus

A

the value gained by producers and consumers

area below the demand curve and above the supply curve

47
Q

Where is economic surplus maximized?

A

at the equilibrium point

48
Q

deadweight loss

A

the overall loss of surplus to society when prices are not set at equilibrium

49
Q

Economic Inefficiency

A

Government intervention and policies that cause deadweight loss

50
Q

Policy makers make____ statements

A

Normative

51
Q

The job of the economist is to make___ statements based on the policy’s actual effect

A

positive

Econ 201 (3 decks)

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