CoreMicroEconomics_CH_1 Flashcards
What is GDP?
Gross Domestic Product - Represents all the goods and services produced annually
What is microeconomics?
The decision making by individuals, businesses, industries, and governments
What is macroeconomics?
The broader issues in the economy such as inflation, unemployment, and national output of goods and services
Explain the scope of economics and economic analysis?
Economic analysis can be usually applied to topics as diverse as how businesses make decisions, how college students allocate their time between studying and relaxing, etc. While economics is separated into two broad categories
What is ceteris paribus?
Assumption used in economics, where other relevant factors or variables are held constant/equal
(For example, holding monthly income constant but changing the price of a product); economics creates simple models that hold all other relevant factors constant
What is efficiency?
How well resources are used and allocated.
Do people get the goods and services they want at the lowest possible resource cost? This is the chief focus of efficiency
What is production efficiency?
Occurs when goods are produced at the lowest possible cost
What is allocative efficiency?
Occurs when individuals who desire a product the most get those goods and services (and is measured by their willingness to pay)
What is equity?
The fairness of various issues and policies
(defined: the quality of being fair and impartial)
(when just a few people earn nearly all of the income and control nearly all of societies wealth, most people agree that this is unfair)
What is scarcity?
Our unlimited wants clash with limited resources, leading to scarcity
(rich and poor) because, at a minimum, our time is limited on earth. Economics focuses on the allocation of scarce resources to satisfy unlimited wants
What is opportunity costs?
What you give up to do something or purchase something.
(for example, to watch a movie at a theater, there is not just the monetary cost of the tickets, but the time involved in watching the movie) You could have been doing something else
What are the key ideas of economics?
Choice and scarcity force tradeoffs
What is the cost of life?
‘Opportunity Costs’ dominate our lives (everything we do involves opportunity costs)
What is rational thinking in economics?
Rational behavior requires thinking at the margin. (thinking about how things will be effected on the curve of things)
People follow ____________.
Incentives
Why are ‘markets efficient’?
Markets increase competition which helps lower prices.
increases competition help lower prices
Government must deal with market failure (like pollution)
.
Information is important
.
Specialization and trade improve what?
Our Lives(you/I), and our standard of living.
___________ determines our standard of living
Productivity
Government can smooth the fluctuation in the overall economy
.
What are the four simple forms of data graphs?
Time series, scatter plots, pie charts, and bar charts
What is a time series data graph?
Involve plotting time on the horizontal axis and the value of some variable on the vertical axis *
What is a scatter plot data graph?
Graphs where two variable (neither variable is time) are plotted against each other *
What is a pie chart data graph?
Show date that can be split into percentage parts that combined make up the whole *
What is a bar chart?
Use bars to show the value of specific data points *
What is a linear relationship?
The curve is a straight line
(ex. for every hour studied, GPA increases by .1) *
How to compute the slope of a linear line?
Slope = rise/run *
What is a nonlinear relationship?
More realistic than linear, there is a curve in the graph
(ex. First, hours of studying results in greater improvements to GPAs than further studying hours; exhibits what experts call diminishing returns)*
How to compute the slope of a nonlinear curve?
Computing the slope at point a requires drawing a line tangent to that point then compute the slope for that line *
What is a simple linear equation?
Y=a+b*X
where Y is the variable plotted on the y axis and a is a constant (the vertical intercept so when X is zero)
and b is a different constant multiplied by X, the value on the x axis (ex. using average study hours per week to figure out GPA, .1 increase of GPA per hour starting with a GPA of 1.0, looks like GPA=1.0+.1*Hour per week) *
Explain why correlation is not the same as causation?
The relationship between two events that are occurring at the same time is ambiguous. The fact that they are happening together (correlation) does not mean that one caused the other (causation)
What is real GDP?
Real Gross Domestic Product is a macroeconomic measure of the value of economic output adjusted for price changes. This adjustment transforms the money-value measure, nominal GDP, into an index for quantity of total output.
Adam Smith
Wrote: The Wealth Of The Nations”
- Invisible Hand (“By directing that industry in such a manner as its produce may be of the greatest value)
- “father of political economy”
- People seem to support or oppose him.
