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EC1101E > EC1101E > Flashcards

EC1101E Flashcards

1
Q

what is considered scarcity?

A

“Deficient in quantity compard with demand

Insufficient to satisfy needs or wants”

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2
Q

What scarce resources does society face?

A

Labour, Capital(Physical capital and human capital), Land & Natural Resources, Entrepreneurship(ability and willingness to combine resources into a productive enterprise)

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3
Q

What is Economics?

A

Study of choice under scarcity

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4
Q

What is opportunity cost?

A
  • whatever must be given up when we make that choice”
  • consist of explicit(monetary) and implicit(non-monetary sacrifice) cost
  • when the alternative choices are mutually exclusive, implicit cost is value of next best alternative
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5
Q

What is considered explicit cost?

A

Monetary sacrifice

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6
Q

What is considered implicit cost?

A

“Non monetary sacrifice (most of the time will be time)

  • When alternatives are mutually exclusive, implicit cost is value of next best alternative(only the next best, so 1 other choice, NOT EVERY OTHER CHOICE AVAILABLE)”
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7
Q

What are the 5 core principles of Economics?

A

“1. Scarcity implies trade off (Unlimited wants and limited resoures)

  1. Bargaining strength comes through Scarcity( scarce resource command high prices)
  2. Compare cost and benefit (Action’s benefits should be AT LEASTS AS great as the cost, esp opp cost)
  3. People respond to changes in cost and benefits(if beneift rise, or cost fall, likelihood of action increases)
  4. Focus on your Comparative advantage (everyone gains when individual focuses on activities in which their oportunity cost are the lowest)”
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8
Q

What is microeconomics?

A

Study of how households and firms make decisions and how they interact in markets

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9
Q

What is macroeconomics?

A

study of economy wide phenomena(eg inflation, UnN)

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10
Q

What is positive ecnomics?

A

Can be confirmed or refuted by examining evidence”

“Addressses the narrow ““What is “” question (eg What is the impact of …?)

describe the world as it is

answered with the tools of economics, without interjecting any value judegemnet as to whether desirable or harmful

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11
Q

What is normative economics?

A

“Attempts to prescroiube how the world SHOULD BE

"”What should….””

Require value judgement (ans may differ egardless of wha thte theory or facts tell us)

cannot be confirmed or refuted”

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12
Q

What does PPF stand for and what does it do?

A

“Production Possibilities Frontier

A graph that shows all combination of 2 goods that can be produced given the available resources and technology”

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13
Q

What does the slope of PPF indicate?

A

“Opportunit cost of good x in terms of good y

(but always negative of the slope since slope is negative, note to self, created by self)

(NOTE TO SELF 2: THE SLOPE OF THE GRAPH MULTIPLIED BY -1 IS THE OPP COST OF THE GOOD ON X AXIS , EXPRESSED IN TERMS OF GOOD ON Y AXIS)”

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14
Q

Explain the process of moving along the PPF

A

“It involves the shifting resources from production of one good to another good

Resources are limited, getting more of one good requires sacrificing some of the other

BECAUSE SCARCITY IMPLIES TRADE OFFS (core economic principle)”

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15
Q

What are possible reasons why PPF shift outwards?

A

“Additional resources
Improvement in technology”

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16
Q

What happens when more resources and better tech?

A

“PPF shifts OUTWARDS

(NOT TO THE RIGHT!!!!!!!)”

17
Q

What is the difference between a straight and concave PPF? Explain concave PPFs

A

“Straight= const opp cost

Concave= rising opp cost as economy produces more of the good, as different resources are suited for different uses and different resources have different opp cost of producing one good in terms of the other good.”

18
Q

“PPF: Guns(y axis) ) Butter(x axis)

) denotes shape of graph

Explain what happens when produce more butter
“

A

As economy shift resources from guns to butter, PPF becomes steeper, opp cost of butter increases

19
Q

“What happens when the PPF point is nearer to the y axis, AND IT MOVES TOWARDS THE X AXIS ALONG PPF?

(guns in y axis, butter on x axis)”

A

Most workers are producing guns, even those who are better suited to produce butter. To get more butter, do not have to give up many guns, as the OPP COST OF BUTTER IS LOW.

20
Q

“What happens when the PPF point is nearer to the x axis, AND IT CONTINUES TO MOVE TOWARDS THE X AXIS ALONG PPF?

(guns in y axis, butter on x axis)”

A

Opp cost of butter is HIGH. At the initial point, most workers are already producing butter, and a few left in guns are the beest gun makers. Producing more butter would require shifting some of the best gun makers away from guns, and would cause a big drop in the output of guns.

21
Q

What is absolute advantage?

A

“It is the ability to prudce a good using FEWER inputs than another producer (ONLY REFERING TO ONE GOOD AT A TIME)

It measures the cost of a good in terms of the inputs required to produce it”

22
Q

What is the comparative advantage?

A

“It is the ability to produce a good at a lower opp cost than another producer

(MUST MEASURE IN TERMS OF HOW MUCH OF THE OTHER GOOD FOREGONE, NOT INPUTS!!!!!)”

23
Q

Explain process of comparative advantage and its use?

A

When each country specialise in the good in which it has a comparative advantage, total production in all countries is higher, the world’s economic pie is bigger, and all countries gain from trade

24
Q

When will implicit cost be equal to the value of the next best alternative?

A

When the alternatives to a choice are mutually exclusive(when 2 or more events cant occur at the same time)

25
Q

“The opportunity cost of attending univeristy is :

  1. Cost of tuition, fees, books
  2. Foregone wages
  3. cost of tuition, fees, and books as well as foregone wages”
A

3(cause paying tuition fees and foregone wages are NOT mutually exclusive, and can occur at the same time)

26
Q

“Which of these are correct for opportunity costs of owning a cat, explain why each of these are wrong or correct?

John:”” the $500 I will have to spend on cat food and the time spent prepping the cat food””

Paul: ““the $500 I will have to spend on cat’s food and the discomfort arising from my cat allergy””

George: ““the $500 I will have to spend on the cat food and the Apple Watch I could have bought with $500””

Ringo: ““the $500 I will have to spend on the cat food and, assuming I can only have one pet, the joy derived from having a dog”””

A

“John: Correct

Paul: Correct

George: Wrong, refer to chicken rice and pasta question. Wrong because of using the word ““and””. Case 1: If next on George’s priority is saving the $500 as compared to getting the apple, opp cost is saving $500. Case 2: If next on George priority is getting apple watch, then opp cost is the Apple watch.

Ringo: Wrong, as incomplete explanation. His answer should have been joy derived from having a dog MINUS THE COST OF FEEDING THE DOG. He never say net benefit, where you are supposed to take benefit minus cost, when it comes to the next best alternative.”

27
Q

”
You are deciding what to have for lunch at The Deck. You have
two options: chicken rice and pasta. Each option costs $5. What is
the opportunity cost of pasta?

A. Chicken rice
B. $5
C. Chicken rice and $5
D. None of the above
“

A

A or B is correct. Case 1L where

28
Q

“You can either read a sociology chapter or a history chapter. Given no other information, your opportunity cost of reading a sociology chapter multiplied by your opportunity cost of reading a history chapter

A: is equal to 1.
B: is equal to 2.
C: is greater than 1 but less than 2.
D: is less than 1.
E:There is not enough information to answer the question.”

A

A

Randomly input numbers:
1 hour : you can either read 1 soci chapter OR 2 HIST CHAPTER

opp cost of sociology = 2 hist/ 1soci

opp cost of history = (1/2 soci) / 1 hist

opp cost of soci * opp cost of history = 1
(when have 2 goods, opp cost of 1 good is opp cost of another good)

29
Q

“Jerry is considering attending a concert with a ticket price of $85. The cost of driving to the concert and parking there will be another $15. In order to attend the concert, he will have to either take time off from his part-time job or forgo studying for an exam scheduled for the next morning. He estimates that he will lose 5 hours at work at a wage of $12 per hour or 5 hours of study time. If he considers studying to be the best alternative use of his time, his opportunity cost of attending the concert is

A: $160 minus the value of the higher exam grade he could earn by studying 5 hours.

B: $100 minus the value of the higher exam grade he could earn by studying 5 hours.

C: $160 plus the value of the higher exam grade he could earn by studying 5 hours.

D: $100 plus the value of the higher exam grade he could earn by studying 5 hours.

E: $100.

F: $60 plus the value of the higher exam grade he could earn by studying 5 hours.

G: The value of the higher exam grade he could earn by studying 5 hours.”

A

D

30
Q

“Suppose a worker in Guavava can grow either 60 tons of guava or 20 tons of papaya a year, and a worker in Papayaya can grow either 36 tons of guava or 12 tons of papaya a year. There are 888 workers in each country. Which of the following is true?

A: Neither country can gain from trade because neither has comparative advantage in guava or papaya.

B: Neither country can gain from trade because Guavava has absolute advantage in both guava and papaya.

C: Both countries can gain from trade.

D: Papayaya can gain from trade but Guavava will definitely lose.

E: Neither country can gain from trade because Papayaya has absolute advantage in both guava and papaya.

F: Guavava can gain from trade but Papayaya will definitely lose.”

A

A

31
Q

“Hobbes bakes cookies and makes lemonade. Calvin also bakes cookies and makes lemonade, but Hobbes is better at both. Which of the following is possible?

I. Trade can benefit both Calvin and Hobbes.

II. Trade will benefit Calvin but not Hobbes.

III. Trade will benefit neither Calvin nor Hobbes.

A: II only

B: I, II, and III

C: III only

D: I and III only

E: I and II only

F: I only

G: Neither I, II, nor III

H: II and III only “

A

D

32
Q

What are the types of capital are there?

A

Physical and Human

33
Q

What is entrepreneurship defined as?

A

Entrepreneurship(ability and willingness to combine resources into a productive enterprise

EC1101E (13 decks)

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