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Matthew Peterson > ECON 2027 > Flashcards

ECON 2027 Flashcards

1
Q

What is Microeconomics?

A

the study of how scarce resources are allocated to satisfy unlimited human wants.

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2
Q

Free Resources?

A

They are unlimited in quantity and therefore have no value or cost.

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3
Q

Economic Resource?

A

They are limited in quantity, meaning there is not an unlimited supply of these resources.

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4
Q

What does NR stand for?

A

Natural Resource

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5
Q

What does K stand for?

A

Capital

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6
Q

What does L stand for?

A

Labor

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7
Q

What is an alternate abbreviation for labor?

A

HK, or human capital

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8
Q

What is an investment?

A

An investment is any sort of addition to the stock of….

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9
Q

What is an example of a K investment?

A

A farmer buying a new tractor for his farm.

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10
Q

What is an example of an L investment?

A

An increase in the number of workers, or an increase in workers skill or knowledge/education.

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11
Q

What are the two types of output?

A

Goods and services

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12
Q

What are the 3 sources of belief?

A

Yourself, institutions, and facts

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13
Q

What are Economic Institutions?

A

Economic systems based on property rights, incentives and decision making.

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14
Q

Yourself as a belief source?

A

Humans have a tendency to believe what we hear and observe.

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15
Q

Institutions as a belief source?

A

Sum of total traditions, laws and government structures in an economy.

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16
Q

Facts as a belief source?

A

Empirical evidence based on observation including but not limited to data and experience.

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17
Q

What was Veblen’s definition of institutions?

A

He called them “habits of the mind.”

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18
Q

Types of economic institutions?

A

Pure capitalism, Socialism, and Pure communism.

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19
Q

Pure Capitalism

A

High levels of freedom regarding property rights and incentives.

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20
Q

Socialism

A

Productive resources are owned by the state, less freedom overall.

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21
Q

Pure Communism

A

Total government involvement in the economy, lowest level of freedom among individuals.

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22
Q

What is Process Theory?

A

The idea that from the beginning to the end, events are bound to occur within the time frame, altering the end result.

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23
Q

What is rational ignorance?

A

The world is complex and the mind is simple

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24
Q

What is the idealized self?

A

The idea that humans believe that they know more than they actually do.

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25
What are agency costs?
A conflict of interest between people or groups. (Teachers and Students)
26
1st characteristic of humans?
Max utility subject to constraint. Humans desire the maximum satisfaction with as little effort as possible.
27
2nd Characteristic of humans?
MU vs MC defines how choices are made in relation to goals and constraints. For example, humans tend to take the easy route.
28
What is marginal cost?
Associated with constraint, more commonly known as cost benefit. The relationship between MU and MC determines if decisions are worthwhile based on the risk to reward ratio.
29
Why do individuals sometimes make seemingly poor choices?
Every decision that someone makes is rational in their own beliefs.
30
How do constraints interfere with human decision making?
Constraints often make choices unappealing. The less constraints, the more likely the goal is to be achieved without issue.
31
Why don't humans change?
Humans are self-interested, and inherently believe that more is greater than less.
32
What defines a winner?
Humans that have a higher desire for MU>MC
33
What are the two types of constraints?
External (Physical ability), and internal (morals and ideals).
34
How do humans bypass external constraint?
They utilize a lack of internal control. For example, lying about ones abilities in order to force others to think highly of someone.
35
What allows internal constraint to exist?
Morals and ideals
36
What two groups are involved in politics?
Groups, as opposed to individuals.
37
True or false; The government will always act in the best interest of the people.
False, the government is concerned about the wellbeing of an entire society, as opposed to singular individuals.
38
How do humans go about purchasing goods and services?
They consider max utility subject to constraint.
39
What are the two constraints with regards to goods and services?
Budget and price
40
What is nominal price?
The actual price of said good or service
41
What us full price?
Nominal price + transaction costs.
42
True or false; People often make decisions based on the full price as opposed to the marginal price.
True, people often consider the full price of goods and services, as full prices are subject to constraint.
43
What determines the value of a full price.
Dependent on the individual and their opposition to constraints and transaction cost.
44
Utility
the relationship between mu and mc, otherwise known as bang for your buck
45
CE
Consumer equilibrium
46
BL
Budget line
47
CE on BL
CE exists when the mu/p's of two products are equal, meaning the max utility was achieved, subject to the constraint of the budget.
48
What happens to utility as more goods are consumed?
The bang for the buck decreases, as more goods are consumed, the amount of utils decreases, lowering the relationship between utils and price, giving a lower level of satisfaction.
49
What two steps are used to find the CE on a BL?
1) Find the total utility by adding the marginal utility 2) Add the prices together in order to form a budget
50
What are "lumpy" results?
Lumpy results are defined as when there is excess money leftover in a budget, but the cost of another good is more than the remaining budget. ex- $2 remaining but another drink cost $4.
51
What makes CE so great?
CE is max utility subject to constraint. Any other combination will result in less utility.
52
TU
Total utility, or the sum of all marginal utilities.
53
MU
Marginal utility or the individual value of one good.
54
What is an intellectual?
A person who lives in a world of thought, whether their ideas are correct or incorrect.
55
Are individuals self interested?
Yes, humans are inherently inconsiderate toward others.
56
How are societies composed?
Societies are composed of self interested individuals, and coexist, while the focus remains on their own selfish behaivor.
57
What makes a "happy" society.
One in which each individual maximizes their own personal utility.
58
What idea was the US created with?
Everyone can maximize their own utility at their own discretion.
59
Was the constitution written for individuals or groups?
Individuals
60
How is respect distributed?
Given to groups, while having to be earned by individuals.
61
What makes a weak person?
Someone who hides their flaws behind the identity of the group.
62
Totalitarianism
Hate individualism and strive to control humans.
63
How do totalitarians function?
They strive to destroy others individualism in order to maintain their own.
64
JS Mill
Thought that we should provide ex ante social justice, by providing humans with what we need to maximize our own utility.
65
Karl Marx
Thought we should provide ex post social justice, and had a socialist view that all humans will end up the same. The poor and those less fortunate should get their fair chance at maximizing their own utility.
66
Ex ante vs Ex post
inherently, the government takes from the rich and gives to the poor, because nobody volunteers to do so.
67
Problem with taking from the rich and giving to the poor?
Incentives change, making the rich want to work less because they feel robbed, while the poor work less because of free handouts.
68
Low achievers?
Gain without pain, so their marginal cost is zero
69
Examples of socialist policies in America?
40-hour work week Child labor laws Minimum wage
70
"Assistance should me a tonic, not a sedative."
Help those who seek to succeed and grow, not those who seek free handouts.
71
Democracy -> Tyranny (4 Steps)
1) The poor vote to tax the rich. 2) When the rich are exhausted, the poor revolt. 3) Strongman comes to restore power (Hitler) 4) Tyranny follows
72
Private choice
made by individuals in the market.
73
Public choice
what an individual thinks the government should do.
74
Property Rights
The rules related to the ownership and control of resources
75
Property right incentive?
To keep or grow your resources
76
Strong middle class=
Stability in the economy
77
2 Kinds of property rights?
Private Common Ownership
78
Private ownership=
full ownership by individuals and are protected by patents, copyright, etc...
79
Common ownership=
property rights do not exist or poorly defined
80
Economic efficiency
Producing goods and services at the lowest cost, and trading goods so as to maximize all traders.
81
Common ownership incentive=
First come first serve, take all you want
82
Private ownership incentive=
To create, for your own benefit. If mu>mc, do as you wish.

Matthew Peterson (9 decks)

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