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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
Q

Competitive markets naturally move towards __________.

A

equilibrium

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26
Q

What is consumer surplus?

A

the surplus value consumers receive from their expected prices

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27
Q

What is producer surplus?

A

the surplus value from the opportunity cost producers receive

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28
Q

Combining consumer and producer surplus can help you get what?

A

total surplus

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29
Q

Competitive markets __________ total surplus.

A

maximize

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30
Q

What is elasticity?

A

to measure the size of the changes in prices and quantities as well as their direction

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31
Q

What is the price elasticity of demand?

A

measures how much the quantity demanded responds to a change in price

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32
Q

What is the equation for price elasticity of demand?

A

percentage change in quantity demanded / percentage change in price
- ABSOLUTE VALUE

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33
Q

What does the price elasticity of demand reflect?

A

how responsive consumers are to changes in the price of a good or service

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34
Q

What does it mean when demand is said to be elastic?

A

if a one percent change in price results in a greater than one percent change in the quantity demanded

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35
Q

What is price elasticity of supply?

A

percentage change in quantity supplied / percentage change in price

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36
Q

What does price elasticity of supply reflect?

A

the ease with which suppliers can alter the quantity of production

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37
Q

What is the ease of entry and exit?

A

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

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38
Q

What are scarce resources?

A

If an input required to produce a good is scare, the supply will be inelastic

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39
Q

What is a time horizon?

A

time an investment is held

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40
Q

________ curves of demand and supply are more elastic.

A

Flatter

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41
Q

What is the equation for total revenue?

A

the equilibrium price multiplied by the equilibrium quantity
P x Q

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42
Q

If the demand is elastic, what will total revenue?

A

increase

43
Q

If the demand is inelastic, what will happen to total revenue?

A

decrease

44
Q

price floors are?

A

minimimum price set by the government or regulatory authority (prices can’t get lower than this)

45
Q

what are price ceilings?

A

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
Q

what is an example of price ceilings?

A

rent control!!

47
Q

What happens if a price ceiling is below the market equilibrium price?

A

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
Q

Where are price ceilings set on the supply and demand curve?

A

The ceiling is technically on the bottom, they try to stay below equilibrium to create shortage?

49
Q

Price floors are designed to protect who?

A

producers

50
Q

What is the purpose of price floors?

A

protect producers and workers, ensuring that farmers receive a minimum income for their crops

51
Q

What happens if the price floor is above the market equilibrium price?

A

it creates a surplus (excess supply), producers are willing to supply more than consumers are willing to purchase at that price

52
Q

What happens if the price floor is set below the market equilibrium price?

A

it has no effect because the market price will naturally stave above the floor

53
Q

What an example of price floor?

A

MINIMUM WAGE: government sets a minimum hourly wage that employers must pay workers

54
Q

Are price floors meant to be above or below equilibrium?

A

above, ironically

55
Q

What is economic stabilization?

A

taxes! tools for managing the economy, may adjust tax rates to influence the level of economic actviity?

56
Q

During a recession, what should the government do to tax rates?

A

lower taxes to boost consumer spending and investment

57
Q

During inflation, what should the government do to control the economy? (tax-wise)

A

increase taxes to reduce spending and slow down the economy

58
Q

What is deadweight loss?

A

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
Q

What is a price wedge?

A

a tax creates a price wedge between what consumers pay and what suppliers receive

60
Q

What is government revenue?

A

the government collects tax revenue, but less than expected due to reduced demand

61
Q

What is reduced surplus?

A

the government’s revenue reduces combined consumer and producer surplus

62
Q

What is tax burden distribution?

A

burden of the tax is shared between buyers and sellers

63
Q

What is comparative advanatge?

A

an economy’s ability to produce a particular good or service cheaper/lower opportunity cost than its trading partners

64
Q

How does adding more producers affect the market supply curve?

A

shifts outwards, and equilibrium price falls

65
Q

When economic profit reaches zero, what happens to entry?

A

reaches zero

66
Q

What is imperfect competition?

A

describes markets with one or only a few suppliers

67
Q

What is a monopoly?

A

if there is one supplier on the market, there is a monopoly!

68
Q

What are natural monopolies?

A

a single firm can supply the market FINISH THIS CARD

69
Q

Why are monopolies bad?

A

consumers pay more for a good or service that they would pay less for in a competitive market

70
Q

What is an example of the government passing laws that prevent or break up monopolies?

A

the Sherman Antitrust Act in 1890

71
Q

Aside from passing laws, what’s another way to counter monopolies?

A

public ownership of resources like water

72
Q

How does ease of entry and exit affect supply?

A

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
Q

What does price elasticity of supply reflect?

A

the ease with which suppliers can alter the quantity of production

74
Q

What does the PPF (Production Possibility Frontier show?

A

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
Q

What does PPF stand for?

A

Production Possibility Frontier

76
Q

What happens when a country is opened to free trade?

A

a country’s new equilibrium price would be the intersection between the world price and the national market price

77
Q

The importation of goods leads to a loss of what?

A

producer surplus

78
Q

Rising prices due to free trade can lead to a loss of what?

A

consumer surplus

79
Q

What is a market with a few sellers?

A

Oligopoly

80
Q

What is it called when the suppliers agree to cooperate in an oligopoblic market?

A

cartel

81
Q

The outcome of an oligopoly will lie somewhere between monopoly and __________ _____________.

A

perfect competition

82
Q

What is monopolistic competition?

A

exists when many companies offer competing products/services that are similar, but not perfect substitutes

83
Q

The barriers to entry in a monopolistic competitive industry are high or low?

A

low

84
Q

What are economic profits?

A

additional payment above the compensation in the next best alternative activity

85
Q

What is zero profits in perfect competition?

A

despite earning zero profits, producers are satisfied

86
Q

What is producers’ behavior?

A

producers seek to earn economic profits by escaping competitive market constraints

87
Q

What is imperfect competition?

A

producers can create barriers to entry and restrict supply
- this leads to economic profits, but also inefficiencies compared to a competitive market

88
Q

What is market power?

A

firms create monopolies or market power through innovation or differentiation

89
Q

What is excludability?

A

describes the ability to control who consumes the good

90
Q

What is creative destruction?

A

innovation breaks down existing market imperfections while creating new opportunities (i.e; competition with the iphone)

91
Q

What is GDP?

A

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
Q

When did the US economy suffer a major downturn?

A

Great Depression

93
Q

What is the equation for the labor force?

A

employed + unemployed individuals actively seeking work

94
Q

Does unemployment ever achieve zero?

A

NO; there will always be a number of people that don’t have jobs

95
Q

What happens during inflation?

A

the rate of increase in prices over a given period of time, the things people consume become more expensive

96
Q

Since the 1970s there have been more imports or exports?

A

more imports

97
Q

What are final goods>

A

disagreement over whether items like national defense are final goods or intermediate goods

98
Q

What does the GDP fail to account?

A

for one, environmental impact, and also overall happiness of the country

99
Q

What are the four categories of purchasers?

A

households, firms, government, foreign sector

100
Q

What is frictional unemployment?

A

working between jobs, short term

101
Q

What is structural unemployment?

A

removal of a type of job from the economy, permanent unemployment

102
Q

What is cyclical unemployment?

A

related to swings in business cycle-recessions (recession, economy not in a good state)

103
Q

What is the equation for the unemployment rate?

A

of employed divided by total civilian labor force

104
Q
A

acadeca 24-25 (6 decks)

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