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acadeca 24-25 > econ > Flashcards

econ Flashcards

1
Q

What is scarcity?

A

there are limited resources and that is inescapable

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2
Q

What is opportunity cost?

A

what you choose to give up Ex: college expenses, the time you get out of what you spend

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3
Q

Economic analysis relies on careful observation, description, and measurement of economic something

A
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4
Q

What is positive eocnomics?

A

cause and effect relationships, value free

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5
Q

What is normative economics?

A

combines econ analysis

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6
Q

What is microeconomics?

A

Focuses on individual decisions
- study of how individuals make choices in response to changes in incentives, prices, resources, and/or methods of production
- interaction of supply and demand in markets!

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7
Q

What is macroeconomics?

A

focuses on large scale results of individual decisions

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8
Q

What is a market?

A

is comprsied of all of the buyers and sellers of a particular god or service, can be formal or informal

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9
Q

What does it mean to be perfectly competitive?

A

good or service bought and sold is highly standardized (produced the same way
- the number of buyers and sellers is large
- all of the participants are well-informed about the market price

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10
Q

What is the “negative” relationship/law of demand?

A

if quantity demanded of any good is the amount of that good buyers are willing and able to purchase, if price is higher, buyers will demand less, if price is lower, buyers demand more

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11
Q

If income rises or falls, demand for normal goods will also rise or fall.

A
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12
Q

If income is lowered, consumers may turn to inferior goods instead.

A
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13
Q

What are related goods?

A

when in a decline in the price of one good causes lower demand in another, these goods are SUBSTITUTES

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14
Q

What is it called when a lower price for one good causes an increase in demand for another good?

A

complements

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15
Q

What are tastes?

A

If the perceived benefits of using/buying a good changes, then so will the amount demanded

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16
Q

What is the main factor affecting supply?

A

PRICE

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17
Q

How does more money affect supply?

A

MORE SUPPLY

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18
Q

How does the supply curve work?

A

More money, more supply

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19
Q

How may the number of supply affect the supply curve?

A

As more sellers enter the market, the quantity supplied will increase!

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20
Q

What are input prices?

A

the prices of things needed to produce a product

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21
Q

How would an increase in input prices affect the supply curve?

A

Decreased supply, shift to the left

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22
Q

What is equilibrium?

A

when buyers and sellers in the market are all satisfied, markets including buyers and sellers, naturally gravitate toward a state of equilibrium

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23
Q

What is excess supply?

A

When there is more supply than demand, and the price becomes more than the equilibrium price

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24
Q

What is excess demand/shortage?

A

occurs when the price of a good is lower than the Equilibrium Price, meaning more consumers want to buy the good than suppliers are willing to sell
- something becomes valuable!

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25
Competitive markets naturally move towards __________.
equilibrium
26
What is consumer surplus?
the surplus value consumers receive from their expected prices
27
What is producer surplus?
the surplus value from the opportunity cost producers receive
28
Combining consumer and producer surplus can help you get what?
total surplus
29
Competitive markets __________ total surplus.
maximize
30
What is elasticity?
to measure the size of the changes in prices and quantities as well as their direction
31
What is the price elasticity of demand?
measures how much the quantity demanded responds to a change in price
32
What is the equation for price elasticity of demand?
percentage change in quantity demanded / percentage change in price - ABSOLUTE VALUE
33
What does the price elasticity of demand reflect?
how responsive consumers are to changes in the price of a good or service
34
What does it mean when demand is said to be elastic?
if a one percent change in price results in a greater than one percent change in the quantity demanded
35
What is price elasticity of supply?
percentage change in quantity supplied / percentage change in price
36
What does price elasticity of supply reflect?
the ease with which suppliers can alter the quantity of production
37
What is the ease of entry and exit?
if it is easy for new businesses to begin supplying a product or for those int he market to leave, then supply will tend to be more elastic
38
What are scarce resources?
If an input required to produce a good is scare, the supply will be inelastic
39
What is a time horizon?
time an investment is held
40
________ curves of demand and supply are more elastic.
Flatter
41
What is the equation for total revenue?
the equilibrium price multiplied by the equilibrium quantity P x Q
42
If the demand is elastic, what will total revenue?
increase
43
If the demand is inelastic, what will happen to total revenue?
decrease
44
price floors are?
minimimum price set by the government or regulatory authority (prices can't get lower than this)
45
what are price ceilings?
a maximum price set by the government for a good or service - designed to prevent prices from rising to an unaffordable level, that people can no longer purchase that product - protect from rapidly increasing prices of essential goods or services
46
what is an example of price ceilings?
rent control!!
47
What happens if a price ceiling is below the market equilibrium price?
creates a shortage (excess demand) where consumers want to buy more than producers are willing to supply at that price - often leads to rationing or black markets where the good is sold at higher prices than allowed
48
Where are price ceilings set on the supply and demand curve?
The ceiling is technically on the bottom, they try to stay below equilibrium to create shortage?
49
Price floors are designed to protect who?
producers
50
What is the purpose of price floors?
protect producers and workers, ensuring that farmers receive a minimum income for their crops
51
What happens if the price floor is above the market equilibrium price?
it creates a surplus (excess supply), producers are willing to supply more than consumers are willing to purchase at that price
52
What happens if the price floor is set below the market equilibrium price?
it has no effect because the market price will naturally stave above the floor
53
What an example of price floor?
MINIMUM WAGE: government sets a minimum hourly wage that employers must pay workers
54
Are price floors meant to be above or below equilibrium?
above, ironically
55
What is economic stabilization?
taxes! tools for managing the economy, may adjust tax rates to influence the level of economic actviity?
56
During a recession, what should the government do to tax rates?
lower taxes to boost consumer spending and investment
57
During inflation, what should the government do to control the economy? (tax-wise)
increase taxes to reduce spending and slow down the economy
58
What is deadweight loss?
When both parties bear the brunt of the price, occurs due to fewer transactions - tax reduces market quantity and creates a deadweight loss (welfare loss due to missed beneficial transactions)
59
What is a price wedge?
a tax creates a price wedge between what consumers pay and what suppliers receive
60
What is government revenue?
the government collects tax revenue, but less than expected due to reduced demand
61
What is reduced surplus?
the government's revenue reduces combined consumer and producer surplus
62
What is tax burden distribution?
burden of the tax is shared between buyers and sellers
63
What is comparative advanatge?
an economy's ability to produce a particular good or service cheaper/lower opportunity cost than its trading partners
64
How does adding more producers affect the market supply curve?
shifts outwards, and equilibrium price falls
65
When economic profit reaches zero, what happens to entry?
reaches zero
66
What is imperfect competition?
describes markets with one or only a few suppliers
67
What is a monopoly?
if there is one supplier on the market, there is a monopoly!
68
What are natural monopolies?
a single firm can supply the market FINISH THIS CARD
69
Why are monopolies bad?
consumers pay more for a good or service that they would pay less for in a competitive market
70
What is an example of the government passing laws that prevent or break up monopolies?
the Sherman Antitrust Act in 1890
71
Aside from passing laws, what's another way to counter monopolies?
public ownership of resources like water
72
How does ease of entry and exit affect supply?
if it is easy for new businesses to begin supplying a product or for those in the market to leave, then supply will tend to be MORE elastic!
73
What does price elasticity of supply reflect?
the ease with which suppliers can alter the quantity of production
74
What does the PPF (Production Possibility Frontier show?
the set of choices society faces for the combinations of goods and services it can produce given the resources available using available resources and technology
75
What does PPF stand for?
Production Possibility Frontier
76
What happens when a country is opened to free trade?
a country's new equilibrium price would be the intersection between the world price and the national market price
77
The importation of goods leads to a loss of what?
producer surplus
78
Rising prices due to free trade can lead to a loss of what?
consumer surplus
79
What is a market with a few sellers?
Oligopoly
80
What is it called when the suppliers agree to cooperate in an oligopoblic market?
cartel
81
The outcome of an oligopoly will lie somewhere between monopoly and __________ _____________.
perfect competition
82
What is monopolistic competition?
exists when many companies offer competing products/services that are similar, but not perfect substitutes
83
The barriers to entry in a monopolistic competitive industry are high or low?
low
84
What are economic profits?
additional payment above the compensation in the next best alternative activity
85
What is zero profits in perfect competition?
despite earning zero profits, producers are satisfied
86
What is producers' behavior?
producers seek to earn economic profits by escaping competitive market constraints
87
What is imperfect competition?
producers can create barriers to entry and restrict supply - this leads to economic profits, but also inefficiencies compared to a competitive market
88
What is market power?
firms create monopolies or market power through innovation or differentiation
89
What is excludability?
describes the ability to control who consumes the good
90
What is creative destruction?
innovation breaks down existing market imperfections while creating new opportunities (i.e; competition with the iphone)
91
What is GDP?
Gross Domestic Product (how much an economy produces over time) the measure of the total quantity of goods adjusted for inflation the market value of all final goods and services produced within a country during a specified period of time
92
When did the US economy suffer a major downturn?
Great Depression
93
What is the equation for the labor force?
employed + unemployed individuals actively seeking work
94
Does unemployment ever achieve zero?
NO; there will always be a number of people that don't have jobs
95
What happens during inflation?
the rate of increase in prices over a given period of time, the things people consume become more expensive
96
Since the 1970s there have been more imports or exports?
more imports
97
What are final goods>
disagreement over whether items like national defense are final goods or intermediate goods
98
What does the GDP fail to account?
for one, environmental impact, and also overall happiness of the country
99
What are the four categories of purchasers?
households, firms, government, foreign sector
100
What is frictional unemployment?
working between jobs, short term
101
What is structural unemployment?
removal of a type of job from the economy, permanent unemployment
102
What is cyclical unemployment?
related to swings in business cycle-recessions (recession, economy not in a good state)
103
What is the equation for the unemployment rate?
of employed divided by total civilian labor force
104

acadeca 24-25 (6 decks)

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