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Microeconomics > ECO 201 Exam 1 Review > Flashcards

ECO 201 Exam 1 Review Flashcards

1
Q

Economics

A

the social science that studies production, distribution, and consumption of goods and services OR the study of allocation of LIMITED resources across UNLIMITED wants

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2
Q

What determines who gets: what, how, why, and when?

A

Scarcity

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3
Q

What are limited resources?

A

land, labor, capital, *entrepreneurship

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4
Q

What is land?

A

inputs that exist around us (natural resources)

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5
Q

What is labor?

A

human input/human capital

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6
Q

What is capital?

A

human made inputs (stuff that makes stuff) or anything we use to help us produce other stuff

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7
Q

Is money capital?

A

No, it its NON PRODUCTIVE CAPTIAL. Banks loan out money (potential capital) and it represents a firm’s ability to purchase capital

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8
Q

What is entrepreneurship?

A

bringing together land, labor & capital. Sometimes and sometimes not considered a resource.

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9
Q

What is technology?

A

the recipe by which we bring together land, labor and capital to make a good.

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10
Q

What is a market?

A

an exchange of info about value (doesn’t have to be transactions)

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11
Q

What is positive economics?

A

How the world DOES look like and how things ARE allocated

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12
Q

What is normative economics?

A

How SHOULD the world work and how SHOULD things be allocated

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13
Q

What is microeconomics?

A
  • understanding how we allocate particular goods and resources
  • understanding market failures
  • how we as individuals or small groups make trade offs and the consequences of those trade offs
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14
Q

What is macroeconomics?

A

how nations make trade offs in terms of aggregate spending and production and in the public policy, and the consequences of those trade offs

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15
Q

What are the payments for land, labor, capital and entrepreneurship?

A

land=rent
labor=wage
capital=interest
entrepreneurship=profit

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16
Q

What is value?

A

what are willing to give up to get something we want

17
Q

What is opportunity cost?

A

the thing or activity we gave up to get what we want or do what we do

18
Q

What is the scarcity principle?

A

the opportunity cost of spending more time on any one activity is having less time available to spend on others

19
Q

What is the PPC (PPF)?

A
  • the max amount of 2 goods that can be produced in an economy
  • shows the trade off or opportunity cost of increasing production of 1 good in terms of the other
  • inputs are substitutes if the slope is constant (meaning there’s a constant opp. cost)
  • bowed out curve = increasing opp. cost
20
Q

What is absolute advantage?

A

when 1 person (firm, country) can produce a good using less time or resources than another

21
Q

What is comparative advantage?

A

1 person (firm, country) if she/he/they can produce a good at a lower opportunity cost

22
Q

How to determine comparative advantage

A

what you give up/what you make

23
Q

How do you expand the PPC?

A
  • change in technology

- an increase in resources (L,L,C)

24
Q

How is a change in quantity demand determined?

A
  • movement along the demand curve

- price change

25
Q

How is a change in demand determined?

A
  • shift in the demand curve
  • change in tastes & preferences
  • change in income
  • change in the price of related goods
  • change in expectations
  • change in number of buyers in the market
26
Q

What is a normal good?

A

a good where demand increases as income increases

27
Q

What is an inferior good?

A

a good where demand decreases as income increases

28
Q

What are substitutes?

A

goods we consume one instead of the other

29
Q

What are complements?

A

2 good we consume together

30
Q

What changes quantity supplied?

A
  • moving along the supply curve

- change in price

31
Q

What changes supply?

A
  • shift in curve
  • change in input prices
  • change in technology
  • change in number of sellers
  • change in expectations
  • change in subsidies and/or taxes
32
Q

What is a shortage?

A

buyers are willing to purchase more than sellers provide

33
Q

What reaction does a shortage create?

A

Bid up prices

  • reduces number of buyers willing to purchase
  • increases number that sellers are willing to bring to market
34
Q

What is a surplus?

A

buyers aren’t willing to purchase all the sellers are willing to bring to market

35
Q

What reaction does a surplus create?

A

Bid price down

  • SALE
  • increase number of buyers willing to purchase
  • decrease number that sellers are willing to bring
36
Q

Where is the equilibrium point?

A

at the intersection of supply and demand curves where the amount people want to buy exactly equals how much sellers want to bring to market

37
Q

How do you determine changes in equilibrium?

A
  1. Does demand change?
  2. Does supply change?
  3. What is the effect on equilibrium quantity?
  4. What is the effect on equilibrium price?

Microeconomics (1 decks)

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