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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
Q

insitution

A

habits of the mind

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26
Q

strong middle class =

A

stability

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27
Q

Private ownership

A

controlled and produced by individuals and protected by the government

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28
Q

public ownership

A

anyone can own, first come first serve

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29
Q

do markets occur naturally

A

yes, they require no involvement from the government

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30
Q

Adam Smith

A

Wealth of nations (book)

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31
Q

Pins example

A

1 person on his own produces one, while 10 with machinery produce a few thousand

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32
Q

Decreasing cost

A

the more efficient a process becomes, the lower the cost of production becomes

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33
Q

what do different skills and interest create?

A

supply in the economy

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34
Q

what do different needs and wants create?

A

demand in the economy

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35
Q

What makes barter effective?

A

Each party must possess what the other desires

36
Q

benefits of money exchange

A

money is divisible, readily accepted, leads to a price which is easily understood by all

37
Q

What can goods and services not do?

A

be allocated by prices and quantity at the same time.

38
Q

capitalism

A

market economy and little government involvement

39
Q

command economy

A

Allocated by quantity as opposed to prices in a market economy.

40
Q

What is the eternal problem?

A

The relationship between the poor being unable to afford things, and the allocation of scarce resources.

41
Q

JB Burry

A

“The idea of progress” (1920)

42
Q

2 competing ideas with progress

A

Group 1) thinks in good vs evil (artistic view)
Group 2) thinks in true or false (business view)

43
Q

PPF

A

Production Possibilities Frontier

44
Q

What is PPF?

A

What societies can produce when capital, labor and resources are fully employed.

45
Q

How is PPF similar to the budget line?

A

The PPF is a constant, similar to the budget line, because production does not exist outside of it. (Technology is held constant)

46
Q

PP

A

Production Possibilities

47
Q

What is PP?

A

What society choses to produce based on opportunity cost

48
Q

Increasing specialization =

A

Increasing opportunity cost

49
Q

4 ways to increase PPF

A

1) change in quantity of labor
2) change in capital (k)
3) change in natural resources (nr)
4) change in technology

50
Q

Economic Growth

A

Permanent increase in the productive capacity of the economy

51
Q

How do economies grow?

A

Savings can be utilized to make investments toward growth

52
Q

5 key points

A

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
Q

K/L Ratio

A

Capital to labor ratio

54
Q

Increase KL ratio =

A

Overall increased wealth of countries

55
Q

Capital goods

A

large increase in PPF as production increases at a rapid rate

56
Q

Consumer goods

A

Small increase in the ppf as producing more of a certain good has little to know impact on the growth.

57
Q

comparative advantage

A

Where one country can produce a good for a lower cost than another country in relation to a second good

58
Q

Marginal opportunity production cost

A

the number of units that are not produced when another good is selected to be produced

59
Q

Comparative definition (encyclopedia)

A

A countries ability to produce goods at a lower marginal opportunity cost than another country

60
Q

Trade

A

Each country focuses on what they can produce the most of for the least cost possible

61
Q

Terms of trade (tt)

A

Number of units of 1 good, that are traded for a number of units of another good

62
Q

full cost

A

Nominal cost + transaction fees (cost of transport) which are not included in the nominal price of a good

63
Q

2 artificial barriers

A

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
Q

Infant industry argument

A

It is wise to limit the number of imports being received, relating to an industry that is in development.

65
Q

who is free trade best for

A

countries who need to export in order to fuel their economy

66
Q

Free markets

A

composed of buyers and sellers, where resources are allocated by price

67
Q

Demand

A

buyers demand goods and services

68
Q

Law of Demand

A

an increase in prices, leads to a decrease in quantity demanded. Price and quantity are inversely related

69
Q

2 reasons for LOD

A

decreasing prices, cause existing customers to buy more and quantity will only change if prices change.

70
Q

Change in demand possibility

A

change in budget, or expecting more income can influence the demand for certain goods.

71
Q

normal vs inferior goods

A

normal goods increase in demand with an increase in income, while inferior goods decrease demand with greater income.

72
Q

Substitute VS Complimentary goods

A

Substitute goods move the same way, while complimentary goods move the opposite way.

73
Q

change in taste

A

increase popularity increases demand and vice versa

74
Q

implicit agreement

A

buyers being able to buy what they want and sellers being able to sell as they wish

75
Q

surplus effect

A

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
Q

rationing effect

A

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
Q

Why does PE occur?

A

1) price to high = surplus
2) price to low = shortage

78
Q

Shifting S&D

A

results in a new equilibrium price and quantity. Changes come from shifts in the curve.

79
Q

price floor (ask)

A

minimum legal price

80
Q

price floor info

A

price above equilibrium, good for sellers if they can manage to sell goods in a price floor

81
Q

price ceiling (ask)

A

maximum legal price

82
Q

price ceiling info

A

price below equilibrium, good for buyers if they can find it because it results in a shortage

83
Q

free rider

A

people desire, but do not pay for things

84
Q

externalities

A

cost or benefits of production are neither paid nor received by the producers

85
Q

positive externality

A

bells at sanford, we enjoy them, but the producer receives no benefit

86
Q

negative externality

A

costs are not paid by producer, party nect door is annoying and you cant work

Matthew Peterson (9 decks)

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