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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
Q

What are agency costs?

A

A conflict of interest between people or groups. (Teachers and Students)

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26
Q

1st characteristic of humans?

A

Max utility subject to constraint. Humans desire the maximum satisfaction with as little effort as possible.

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27
Q

2nd Characteristic of humans?

A

MU vs MC defines how choices are made in relation to goals and constraints. For example, humans tend to take the easy route.

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28
Q

What is marginal cost?

A

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.

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29
Q

Why do individuals sometimes make seemingly poor choices?

A

Every decision that someone makes is rational in their own beliefs.

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30
Q

How do constraints interfere with human decision making?

A

Constraints often make choices unappealing. The less constraints, the more likely the goal is to be achieved without issue.

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31
Q

Why don’t humans change?

A

Humans are self-interested, and inherently believe that more is greater than less.

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32
Q

What defines a winner?

A

Humans that have a higher desire for MU>MC

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33
Q

What are the two types of constraints?

A

External (Physical ability), and internal (morals and ideals).

34
Q

How do humans bypass external constraint?

A

They utilize a lack of internal control. For example, lying about ones abilities in order to force others to think highly of someone.

35
Q

What allows internal constraint to exist?

A

Morals and ideals

36
Q

What two groups are involved in politics?

A

Groups, as opposed to individuals.

37
Q

True or false; The government will always act in the best interest of the people.

A

False, the government is concerned about the wellbeing of an entire society, as opposed to singular individuals.

38
Q

How do humans go about purchasing goods and services?

A

They consider max utility subject to constraint.

39
Q

What are the two constraints with regards to goods and services?

A

Budget and price

40
Q

What is nominal price?

A

The actual price of said good or service

41
Q

What us full price?

A

Nominal price + transaction costs.

42
Q

True or false; People often make decisions based on the full price as opposed to the marginal price.

A

True, people often consider the full price of goods and services, as full prices are subject to constraint.

43
Q

What determines the value of a full price.

A

Dependent on the individual and their opposition to constraints and transaction cost.

44
Q

Utility

A

the relationship between mu and mc, otherwise known as bang for your buck

45
Q

CE

A

Consumer equilibrium

46
Q

BL

A

Budget line

47
Q

CE on BL

A

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
Q

What happens to utility as more goods are consumed?

A

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
Q

What two steps are used to find the CE on a BL?

A

1) Find the total utility by adding the marginal utility
2) Add the prices together in order to form a budget

50
Q

What are “lumpy” results?

A

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
Q

What makes CE so great?

A

CE is max utility subject to constraint. Any other combination will result in less utility.

52
Q

TU

A

Total utility, or the sum of all marginal utilities.

53
Q

MU

A

Marginal utility or the individual value of one good.

54
Q

What is an intellectual?

A

A person who lives in a world of thought, whether their ideas are correct or incorrect.

55
Q

Are individuals self interested?

A

Yes, humans are inherently inconsiderate toward others.

56
Q

How are societies composed?

A

Societies are composed of self interested individuals, and coexist, while the focus remains on their own selfish behaivor.

57
Q

What makes a “happy” society.

A

One in which each individual maximizes their own personal utility.

58
Q

What idea was the US created with?

A

Everyone can maximize their own utility at their own discretion.

59
Q

Was the constitution written for individuals or groups?

A

Individuals

60
Q

How is respect distributed?

A

Given to groups, while having to be earned by individuals.

61
Q

What makes a weak person?

A

Someone who hides their flaws behind the identity of the group.

62
Q

Totalitarianism

A

Hate individualism and strive to control humans.

63
Q

How do totalitarians function?

A

They strive to destroy others individualism in order to maintain their own.

64
Q

JS Mill

A

Thought that we should provide ex ante social justice, by providing humans with what we need to maximize our own utility.

65
Q

Karl Marx

A

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
Q

Ex ante vs Ex post

A

inherently, the government takes from the rich and gives to the poor, because nobody volunteers to do so.

67
Q

Problem with taking from the rich and giving to the poor?

A

Incentives change, making the rich want to work less because they feel robbed, while the poor work less because of free handouts.

68
Q

Low achievers?

A

Gain without pain, so their marginal cost is zero

69
Q

Examples of socialist policies in America?

A

40-hour work week
Child labor laws
Minimum wage

70
Q

“Assistance should me a tonic, not a sedative.”

A

Help those who seek to succeed and grow, not those who seek free handouts.

71
Q

Democracy -> Tyranny (4 Steps)

A

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
Q

Private choice

A

made by individuals in the market.

73
Q

Public choice

A

what an individual thinks the government should do.

74
Q

Property Rights

A

The rules related to the ownership and control of resources

75
Q

Property right incentive?

A

To keep or grow your resources

76
Q

Strong middle class=

A

Stability in the economy

77
Q

2 Kinds of property rights?

A

Private
Common Ownership

78
Q

Private ownership=

A

full ownership by individuals and are protected by patents, copyright, etc…

79
Q

Common ownership=

A

property rights do not exist or poorly defined

80
Q

Economic efficiency

A

Producing goods and services at the lowest cost, and trading goods so as to maximize all traders.

81
Q

Common ownership incentive=

A

First come first serve, take all you want

82
Q

Private ownership incentive=

A

To create, for your own benefit. If mu>mc, do as you wish.

Matthew Peterson (9 decks)

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