Econ Flashcards
Economy
How society produces exchanges and consumes goods and resources
Absolute scarsity
Not having enough resources
Economic Scarsity
People have infinite wants
Commodities
Satisfies peoples wants and desires
4 resource types
Labor
Land
Capital
Entreprenurship
4 Types of compensation
Labor=wages
Land=rent
Capital=interest
Entrepreneurship=profits
Noraml profits
need to be earned to stay in buisness
3 Econ agents
Households
Firms
Goverment
Market
Voluntary exchange between buyer and seller of goods/resources
Technical efficiency
Efficient use of resources when producing goods
Allocative efficency
Efficient allocation of societys scarce resources
4 questions economist must answer
What will be made?
How much will be made?
How to produce?
Who for?
Methods of allocating resources
Prices
competitive markets
Dollar Vote
Every time you buy something
Equity
Distribution of income in the economy
Transfer payment
Money without work
Consumer Price index
Measures prices the economy
Economic growth
refers to the increase in the nations income and output
Microeconomic
study of allocation and scarce resources, and distribution of income
Abstraction
Ignoring many details to focus on the most important element of a problem.
Positive statment
deals in fact
Normative statement
Deals on opinion
Production possibility cost
Shows the maximum alternative combination of two goods
Market prices preform 4 functions
- Determine resources allocation
- give consumer & suppliers an idea of value of goods
- Prices provide info about future
- market prices provide incentive
Px Yc Nc Tc Ps Pc YD Ec
Price of goods Income of consumers # of consumers Tast and preference Price of substitue Price of compliment income distribution expectation of consumers
Single market demand function
Tells us the quantity consumers are willing and able to buy
Utility
Satisfaction that a consumer receives
Total utility
Total satisfaction received from a certain quantity of goods.
Marginal utility
Extra utility brought about by and additoin of one more
Income effect
Price increase of good will decrease realitive income.
Veblin
Speical if owned
Giffen
People are extremly poor, potato.
Normal good
if a consumer income increases demand for this good increase
