Econ Main Points Flashcards
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Normative economics
Value judgement based on how economic life should or ought to be
Economics
A behavioral science concerned with the way scarce resources are allocated to satisfy human wants
Positive economics
Observation or explanation of economic life as it is in fact
Ceteris paribus
All other things held equal or constant
*useful as an analytical tool to focus on only the impacts of the variable of interest
Real vs nominal
% vs numbers
Margin
The difference between an existing situation and a proposed (usually small) change
Marginal cost (MC)
The additional cost generated by producing one more unit of output
Marginal revenue (MR)
The additional revenue that will be generated by selling one more unit of output
Marginal product of labor (MPl)
The additional output generated by employing/using one more unit of labor
Demand curve
Slope downward Inverse relation Y=mx+b M-always negative (law of demand) B- the lowest price where the Qd=0
Competition
The effort of two of two or more parties acting independently to secure the business of a third party by offering the most favorable terms
Market equilibrium
Consumer surplus and producer surplus
Supply and demand curves meet
Market clears where they meet
Fundamental theorem of exchange
Gains thru trade
A. Smith’s Invisible Hand
Each individual is motivated toward their own end while the wants of society, in general, are met
Price ________ demanders, ________ suppliers
Rations, motivates
Consumer surplus (CS)
The difference between what a consumer is willing and able to pay for a good or service and what they actually pay
Producer surplus (PS)
The difference between what the producer is willing and able to receive for a good or service and what they actually receive
Property rights
Rules that govern and establish ownership and control of resources in an economy
Determinants in the validity of a property right
Definition
Enforcement
Transferability
Prof mansfield: 3 ways a system of property rights evolve in an economy
Tradition
Command (control)
Market
Price elasticity of demand (Ed)
- Change Qd/Qd/change P/P
Liquidity
The ease with which an asset may be converted into the economies medium of exchange, cet par
Business cycle
The rise and fall of business activity relative to the long term trend line
Competitive market characteristics
Many buyers and sellers Perfect information Homogenous products Free entry and exit Atomistic trade
