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Matthew Peterson > ECON EXAM 2 > Flashcards

ECON EXAM 2 Flashcards

1
Q

Markets

A

Where buyers and sellers meet

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2
Q

Examples of markets

A

goods, services, and anything that can be bought

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3
Q

Illegal markets

A

markets where the government interfere such as drugs and alcohol

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4
Q

Why do markets occur?

A

People are different, no two people are born the same. Different skills create an inherent division of labor.

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5
Q

What is the issue with being overly independent?

A

People who try and create, are more poor materially than those who accept what to buy and what not to.

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6
Q

Theory of exchange

A

Trading goods and services for the mutual benefit of both parties

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7
Q

more specialization = more wants =

A

higher dependence on others = more markets

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8
Q

Barter

A

The exchange of goods and services without the use of $

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9
Q

example of barter

A

3 chickens for a goat

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10
Q

money exchange

A

solved the problem with barter, because money has inherent value and everyone desires to have more of it.

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11
Q

How does money lead to prices?

A

prices indicate the degree of scarcity of a product

utility means nothing without a price

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12
Q

2 functions of prices

A

1) How much of what goods and services can be bought and sold
2) Allocates commodities among buyers and sellers

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13
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.

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14
Q

Why do low achievers have a low marginal cost?

A

They gain something from doing nothing

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15
Q

Examples of modern socialism?

A

40 hr week
child work laws
minimum wage laws

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16
Q

Who deserves help?

A

Those who plan to be productive with given assistance.

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17
Q

Democracy to tyranny in 4 steps

A

the poor tax the rich
the rich exhaust and the poor revolt
young “hero” strives to fix the problem
hitler

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18
Q

rent seeking

A

trying to receive without working.

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19
Q

examples of rent seeking

A

welfare and tax breaks

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20
Q

special interest effect

A

concentrated winners take money from diffuse losers.

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21
Q

Pain with no gain

A

mu»»»>mc

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22
Q

private choice

A

made by individuals in the marketplace

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23
Q

public choice

A

what an individual thinks the government should do

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24
Q

property rights

A

the rules and regulations associated with the control of resources

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25
insitution
habits of the mind
26
strong middle class =
stability
27
Private ownership
controlled and produced by individuals and protected by the government
28
public ownership
anyone can own, first come first serve
29
do markets occur naturally
yes, they require no involvement from the government
30
Adam Smith
Wealth of nations (book)
31
Pins example
1 person on his own produces one, while 10 with machinery produce a few thousand
32
Decreasing cost
the more efficient a process becomes, the lower the cost of production becomes
33
what do different skills and interest create?
supply in the economy
34
what do different needs and wants create?
demand in the economy
35
What makes barter effective?
Each party must possess what the other desires
36
benefits of money exchange
money is divisible, readily accepted, leads to a price which is easily understood by all
37
What can goods and services not do?
be allocated by prices and quantity at the same time.
38
capitalism
market economy and little government involvement
39
command economy
Allocated by quantity as opposed to prices in a market economy.
40
What is the eternal problem?
The relationship between the poor being unable to afford things, and the allocation of scarce resources.
41
JB Burry
"The idea of progress" (1920)
42
2 competing ideas with progress
Group 1) thinks in good vs evil (artistic view) Group 2) thinks in true or false (business view)
43
PPF
Production Possibilities Frontier
44
What is PPF?
What societies can produce when capital, labor and resources are fully employed.
45
How is PPF similar to the budget line?
The PPF is a constant, similar to the budget line, because production does not exist outside of it. (Technology is held constant)
46
PP
Production Possibilities
47
What is PP?
What society choses to produce based on opportunity cost
48
Increasing specialization =
Increasing opportunity cost
49
4 ways to increase PPF
1) change in quantity of labor 2) change in capital (k) 3) change in natural resources (nr) 4) change in technology
50
Economic Growth
Permanent increase in the productive capacity of the economy
51
How do economies grow?
Savings can be utilized to make investments toward growth
52
5 key points
1) Savings is necessary for growth 2) Growth in the future, is determined by present choices 3) decrease today, can lead to an increase later 4) Increase in technology is useless without the savings needed to make the initial investment 5) The middle class makes up the bulk of the economies saving potential
53
K/L Ratio
Capital to labor ratio
54
Increase KL ratio =
Overall increased wealth of countries
55
Capital goods
large increase in PPF as production increases at a rapid rate
56
Consumer goods
Small increase in the ppf as producing more of a certain good has little to know impact on the growth.
57
comparative advantage
Where one country can produce a good for a lower cost than another country in relation to a second good
58
Marginal opportunity production cost
the number of units that are not produced when another good is selected to be produced
59
Comparative definition (encyclopedia)
A countries ability to produce goods at a lower marginal opportunity cost than another country
60
Trade
Each country focuses on what they can produce the most of for the least cost possible
61
Terms of trade (tt)
Number of units of 1 good, that are traded for a number of units of another good
62
full cost
Nominal cost + transaction fees (cost of transport) which are not included in the nominal price of a good
63
2 artificial barriers
1) Tariffs, or import tax placed by the government 2) Quotas, where the government limits the amount of goods that are allowed to be traded
64
Infant industry argument
It is wise to limit the number of imports being received, relating to an industry that is in development.
65
who is free trade best for
countries who need to export in order to fuel their economy
66
Free markets
composed of buyers and sellers, where resources are allocated by price
67
Demand
buyers demand goods and services
68
Law of Demand
an increase in prices, leads to a decrease in quantity demanded. Price and quantity are inversely related
69
2 reasons for LOD
decreasing prices, cause existing customers to buy more and quantity will only change if prices change.
70
Change in demand possibility
change in budget, or expecting more income can influence the demand for certain goods.
71
normal vs inferior goods
normal goods increase in demand with an increase in income, while inferior goods decrease demand with greater income.
72
Substitute VS Complimentary goods
Substitute goods move the same way, while complimentary goods move the opposite way.
73
change in taste
increase popularity increases demand and vice versa
74
implicit agreement
buyers being able to buy what they want and sellers being able to sell as they wish
75
surplus effect
consumer surplus where buyers are able to pay more bu they choose not to. producer surplus where sellers can sell for less but choose not too.
76
rationing effect
under PE, the poor are unable to pay the price of the good. over the PE sellers are unable to sell goods to make a profit.
77
Why does PE occur?
1) price to high = surplus 2) price to low = shortage
78
Shifting S&D
results in a new equilibrium price and quantity. Changes come from shifts in the curve.
79
price floor (ask)
minimum legal price
80
price floor info
price above equilibrium, good for sellers if they can manage to sell goods in a price floor
81
price ceiling (ask)
maximum legal price
82
price ceiling info
price below equilibrium, good for buyers if they can find it because it results in a shortage
83
free rider
people desire, but do not pay for things
84
externalities
cost or benefits of production are neither paid nor received by the producers
85
positive externality
bells at sanford, we enjoy them, but the producer receives no benefit
86
negative externality
costs are not paid by producer, party nect door is annoying and you cant work

Matthew Peterson (9 decks)

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