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Economics > Econ Final > Flashcards

Econ Final Flashcards

1
Q

Tradeoff

A
  • all possible things you could do instead
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2
Q

Opportunity Cost

A
  • Best alternative/ second choice
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3
Q

Thinking at the margin

A
  • deciding to do more or less of something
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4
Q

Underutilization

A
  • not all resources used
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5
Q

Growth

A
  • 2 ways
  • Technology
  • More resources
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6
Q

Law of Increasing Cost

A
  • gets harder to make things when you try to increase production
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7
Q

Frontier/ PPF

A
  • shows maximum output
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8
Q

Purpose of Production Possibilities Graph

A
  • Demonstrates tradeoffs
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9
Q

Guns vs. Butter

A
  • Fundamental tradeoff between military and consumer goods
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10
Q

Economics

A
  • the study of how people seek to satisfy their needs and wants by making choices
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11
Q

Scarcity

A
  • when there are limited quantities of resources to meet unlimited needs or desires
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12
Q

Shortages

A
  • when producers will not or cannot offer goods or services at current prices
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13
Q

Factors of Production

A
  • Land
  • Labor
  • Capital
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14
Q

Land

A
  • all natural resources that are used to produce goods and services
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15
Q

Labor

A
  • any effort a person devotes to a task for which that person is paid
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16
Q

Capital

A
  • any human-made resources that is used to create other goods and services
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17
Q

Two Types of Capital

A
  • Physical Capital

- Human Capital

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18
Q

Physical Capital

A
  • all human made goods that are used to produce other goods and services
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19
Q

Human Capital

A
  • the skills and knowledge gained by a worker through education and experience
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20
Q

3 Fundamental Questions (who?)

A
  • Adam Smith
  • What to produce?
  • How to produce?
  • Who consumes it?
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21
Q

Free Market

A
  • Produce that the consumer wants, produced in whichever way the consumer likes best
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22
Q

Theory of the invisible hand (who?)

A
  • Adam Smith

- the idea that markets regulate themselves

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23
Q

How do markets regulate themselves?

A
  • People are self interested (motivating force)

- Competition forces businesses to have lower prices and good products (regulating force)

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24
Q

Lasse Faire

A
  • government stay out
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25
Q

Economic Goals (Free Markets)

A
  • Freedom
  • Growth
  • Innovation
  • Equity
  • Security
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26
Q

Free Market Strenghts

A
  • Good at Freedom
  • Good at Innovation
  • Good at growth
    (no pure free market exists)
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27
Q

Free Market Weaknesses

A
  • Bad at security
  • Bad at equity
    (no pure free market exists)
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28
Q

Mixed Economy

A
  • a system where power is shared between people in the government
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29
Q

Who owns factors of production (mixed economy)

A
  • owned by people in govt. and individuals
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30
Q

Who makes decisions (mixed economy)

A
  • individuals and people in govt.
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31
Q

Circular Flow Model

A
  • in general CFM’s show relationship between all stakeholders in an economy
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32
Q

Free Market (stakeholders)

A
  • Firms

- Businesses

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33
Q

Mixed Economy (stakeholders)

A
  • Firms
  • Households
  • Govt.
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34
Q

Factor Market

A
  • Stakeholders: households

- sell factors of production (labor)

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35
Q

Product Market

A
  • Stakeholders: Firms

- Sell products

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36
Q

Free Enterprise (purpose)

A
  • to maximize freedom
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37
Q

7 Principle of free enterprise

A
  • Voluntary exchange: you make your own decisions; you decide what you buy and sell
  • Free Contract
  • Legal Equality: all have equal rights
  • Open Opportunity: everyone has a chance to succeed
  • Competition
  • Private property rights: use resources intelligently
  • Profit motive: to get rich
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38
Q

Market Failure

A
  • any situation where a market is overproducing something bad or underproducing something good
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39
Q

Public Good

A
  • any good that you cannot stop someone from using even if they did not pay for it
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40
Q

Extranality

A
  • an economic side effect on an action/ a cost or benefit that effects other people instead of you
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41
Q

Micro Econ

A
  • study of small details (single household)
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42
Q

Macro Econ

A
  • study of entire economies
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43
Q

3 goals of Govt.

A
  • high employment
  • steady growth
  • Steady Prices: low/non-zero inflation
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44
Q

Inflation

A
  • increase in prices (stuff is expensive)
45
Q

Gross Domestic Product (GDP)

A
  • value of all goods and services produced
46
Q

Poverty

A
  • earning less than the poverty threshold
47
Q

Poverty Threshold

A
  • minimum income needed to support your family
48
Q

Welfare programs

A
  • transfer wealth/income from taxpayers to othergroups
49
Q

Entrepeneur

A
  • people who take the risk of starting a businesses/ bring together land, labor, capital to start a business
50
Q

Business Cycle

A
  • period of expansion, followed by contraction
51
Q

Price

A
  • the amount a consumer pays for a good or service
52
Q

Quantity Demanded (QD)

A
  • the amount of a product that all consumers would buy at one particular price (QD is always a number)
53
Q

Law of Demand

A
  • as price increases quantity demand goes down; vice versa
54
Q

Demand

A
  • the relationship between price and QD
55
Q

Ceteris Paribus

A
  • Latin “all else held constant”
56
Q

Inferior goods

A
  • products where demand decreases as income increases

- ex: ramen

57
Q

Normal goods

A
  • any product where as income increases, demand increases
58
Q

Substitutes

A
  • two complementing goods (chicken vs. beef)
59
Q

Complements

A
  • two goods that are bought together
60
Q

Elasticity of Demand

A
  • a measurement of how consumers react to a change in price
61
Q

Elastic

A
  • responsive to price changes

- Qd changes MORE that price (elasticity>1)

62
Q

Inelastic

A
  • unresponsive to price changes

- Qd changes LESS than price (inelasticity<1)

63
Q

Unitary

A
  • elasticity = 1
64
Q

Formula for elasticity

A
  • E= /(Qo-Q1)/(Qo)/(Po-P1)/(Po)/
65
Q

Quantity Supplied

A
  • amount of a product that sellers (firms) would be willing to sell at a given price
66
Q

Supply

A
  • a prediction of what quantity supplied will be at all prices (not ever a single number)
67
Q

Law of Supply

A
  • as price increases, quantity increases; vice versa
68
Q

Elasticity Supply

A
  • a measurement of how producers react to a change in price
69
Q

Marginal Product of labor

A
  • change in output from hiring one more worker
70
Q

Diminishing Marginal Returns

A
  • MPL is shrinking
71
Q

Negative Marginal Returns

A
  • MPL is negative
72
Q

Marginal Revenue

A
  • change in income from producing one more unit (always equal to price)
73
Q

Marginal Cost

A
  • change in cost from producing one more unit (always increases once diminishing returns are hit)
74
Q

Equilibrium

A
  • the point where quantity supplied equals quantity demanded
75
Q

Po

A
  • equilibrium price (market price)

- the price that will be used

76
Q

Q

A
  • equilibrium quantity

- amount that will be bought/sold

77
Q

Disequilibrium

A
  • excess supply

- excess demand

78
Q

Surplus

A
  • excess supply
  • Qs>Qd, price is above Po
  • result: price will drop to Po
79
Q

Shortage

A
  • excess demand

- Qs

80
Q

Price Ceiling

A
  • max price
81
Q

Price floors

A
  • minimum wage
82
Q

Role of price

A
  • price determines how society allocates (distributes) resources
83
Q

Perfect competition

A
  • market structure w/many firms selling identical products; little to no control over price
84
Q

Market Power

A
  • control over prices
85
Q

Perfect Information

A
  • everyone is aware of what everyone is doing
86
Q

Monopoly

A
  • market structure; dominated by a single seller
87
Q

Barriers to entry are complete

A
  • no one can get in
88
Q

Start up costs

A
  • any money used to start up a business
89
Q

Full market power

A
  • monopolies control supply curve
90
Q

Govt. Monopoly

A
  • Monopoly created by govt. (patents)
91
Q

Natural Monopoly

A
  • a market that is most efficient with only one seller

- caused by economics of scale: average total cost decreases as customers increase

92
Q

Monopolistic Competiton

A
  • not monopoly
  • many firms selling similar, not identical products
  • firms have some market power
93
Q

Non price competitons

A
  • competing by changing some aspect of the product, such as quality, shape, branding, location, or service, but not changing price
94
Q

Oligopoly

A
  • a small handful of firms control most of the output

- (min: 2/ max: less than a lot ex:10)

95
Q

Collusion

A
  • illegal agreement by firms to not compete
96
Q

Specialization

A
  • focusing labor on one task

- allows for increasing marginal returns

97
Q

Regulation/ deregulation

A
  • govt. rules limiting production/ opposite of regulation
98
Q

Barter

A
  • direct exchange of goods and services
99
Q

Money

A
  • anything that can be used as
  • medium of exchange
  • unit of account
  • store of value
100
Q

Currency

A
  • bills and coins used as money (all money is currency, not all currency is money)
101
Q

6 Characteristics of Money

A
  • portability
  • durability
  • uniformity
  • divisibility
  • limited supply
  • acceptability
102
Q

3 Types of Money

A
  • commodity: something that has value on its own
  • representative: paper money backed by a commodity
  • fiat money: money that has value because the govt. said so
103
Q

Fractional Reserve banking

A
  • a banking system where banks only keep a portion (fraction) of deposits on hand, and lend out the rest
  • how banks make money
  • lending creates money
104
Q

Bank run

A
  • panic where all customers try to withdraw their money at once
105
Q

Federal Reserve

A
  • US central bank
106
Q

Federal deposit insurance corporation

A
  • insures deposits up to $250,000
107
Q

Money supply

A
  • total amount of money in an economy
108
Q

Mortgage

A
  • loan used to purchase real estate
109
Q

Installment Loan

A
  • car loan

Economics (9 decks)

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