Definitions Flashcards
Examines the behavior and decisions of individual firms and households and the way they interact in specific industries and markets. We would use it to analyze decisions made by individual firms, or to look at how certain factors can affect the market for a specific good.
Microeconomics
Focuses on the whole national economy or even the whole world economy. It examines the workings and problems of the whole economy, looking at features such as GDP growth and unemployment. We would use it to examine the factors that contribute to a country or region’s overall economic growth, or to determine the cause of economic fluctuations (e.g. recessions).
Macroeconomics
The impact of the price of oil on all prices in the economy.
Micro or Macroeconomics?
Microeconomics.
On a “micro” level, higher oil price leads to higher gasoline prices. That in turn affects the costs faced by the vast majority of households and businesses. For example, when gasoline prices increase, a larger share of households’ budgets is likely to be spent on it, which leaves less to spend on other goods and services. To what extent higher oil prices cause changes in the prices of those goods and services (and gasoline prices) is the subject of microeconomics. On the other hand, higher oil prices also affects the general price level in the economy. In other words, it affects inflation rate (defined as the increase in the general price level of goods and services in an economy over a period of time.) This is one of the effects of higher oil price on the economy at the “macro” level.
The value of that next best foregone alternative that wasn’t chosen
because you did something else.
Opportunity Cost
Explain the example of Google and Cisco. Specialization, division of labor and comparative advantages.
Google’s mainly involved with software, and Cisco’s mainly involved with hardware. The switches and the cables, the backbone of the internet. They felt, as many firms do, that specializing to some extent is a great benefit. And so rather than they both do things, rather than Google both does hardware and software, and rather than Cisco does both hardware and software, they split it up,
and they divide that. And they could sell the products,
so obviously Cisco could buy Google services, and Google indeed buy Cisco services.
So they exchange, they trade, and they produce more as a result.
Trade can make two individuals or firms better off than if the trade did not happen. Because of this, in this framework, an important role of government is to ensure that trade can happen. There are five main components to this:
Predictable policy framework: the government needs to be predictable in its decision-making process.
Rule of law (e.g. property rights): property rights need to be clearly defined and enforced.
Reliance on market economy: the government needs to allow the market to determine prices and quantities produced.
Good incentives: the government needs to provide good incentives for economic activity, such as patents to encourage innovation.
Specific role of government: the government needs to be able to intervene in the case of market failure, when the market would fail to reach the efficient outcome.
Cómo mejora la Production Possibilities curve en el tiempo? Cómo se grafica eso?
La curva se desplaza a la derecha porque la producción es ahora más productiva.
Qué es lo ineficiente, eficiente e imposible en la Curva de posibilidades de producción?
Lo ineficiente es lo que se ubica por debajo de la curva, se está siendo poco productivo. Lo eficiente es lo que grafica exactamente la curva, es el óptimo de producción. Y l imposible es todo lo que está por sobre la curva ya que no existen los recursos ni el capital para producir esas cantidades mayores.
Cuál es el costo de oportunidad en la curva de posibilidades de producción?
El costo de oportunidad de observa al dejar de producir más de un bien por priorizar la producción de otro bien con esos recursos escasos. Al producir menos computadores, tendré más recursos para producir películas. Al no producir ningún computador (costo de producción muy alto), podré producir una gran cantidad de películas.
GDP
PIB
Gross Domestic Product
Producto Interno Bruto
is the value of the next-best forgone alternative to making a choice
Opportunity Cost
improvements in income, production, or satisfaction owing to the exchange of goods or services
Gains from Trade
a concentration of production effort on a single specific task
Specialization
the division of production into various parts in which different groups of workers specialize
Division of Labor
a situation in which a person or group can produce one good at a lower opportunity cost than another person or group
Comparative Advantage
