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Econ midterm 1 > Econ midterm 1 > Flashcards

Econ midterm 1 Flashcards

1
Q

econ is the study of

A

scarcity

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2
Q

opportunity cost

A

cost of what we give up to take an action

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3
Q

societal interest

A

what is most “valuable” to society

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4
Q

marginal cost

A

cost of an additional action

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5
Q

marginal benefit

A

benefit of an additional action

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6
Q

good models should be:

A

Tractable- simple enough to understand
Predictive- tells something important

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7
Q

assumptions for the sake of tractability

A

all other things are equal
we change only one variable

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8
Q

types of macroeconomics

A

monetary
finance
Growth and development

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9
Q

what does the PPC assume

A

we fully use our resources

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10
Q

what is the relationship between two different input on the PPC

A

the more different they are the more the PPC bows out

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11
Q

Trade model assumptions

A

same level of resources
technology differs
constant opportunity cost (straight line PPC)

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12
Q

Absolute advantage

A

making more from the same level of inputs

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13
Q

comparative advantage

A

ability to make a good for a lower opportunity cost

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14
Q

specialization

A

when countries only produce 1 good based on their comparative advantage

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15
Q

pareto improving outcomes

A

when at least is better off without making anyone worse off

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16
Q

PPC assumptions for growth

A

resources are fixed
technology is fixed

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17
Q

what does it mean when comparative advantage is over 1

A

large amount and comparative advantage

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18
Q

does price change demand

A

NO! changes quantity demanded

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19
Q

shifts for demand

A

taste or preference
income
population
price of related goods
expectations of future prices

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20
Q

what happens to normal goods when income increases

A

demand increases and vice versa

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21
Q

what happens when to inferior good when income increases

A

demand decreases and vice versa

22
Q

What happens to good B when good A increases in price when they are substitutes

A

demand increases and vice versa

23
Q

What happens to good B when good A increases in price when they are compliments

A

demand decreases and vice versa

24
Q

equilibrium

A

where where demand and supply intersect

25
Q

slope of demand

A

down

26
Q

slope of supply

A

up

27
Q

shortage

A

quantity demanded is greater than supply

28
Q

surplus

A

quantity supplied is greater than demanded

29
Q

deadweight losses

A

benefit no one
surplus and shortage

30
Q

what does market clearing help with

A

avoiding deadweight losses

31
Q

elasticity

A

how much quantity demanded changes when price changes

32
Q

a lot of substitutes means the good is

A

more elastic

33
Q

determinants of elasticity

A

availability of close substitutes
more substitutes=more elastic
necessities vs luxuries
necessities are less elastic

34
Q

as more time passes what happens to elasticity

A

increases because you have more time to find substitutes

35
Q

if a good takes up smaller percentage of your income it is

A

more elastic

36
Q

perfectly elastic

A

horizontal line
gas at two gas stations

37
Q

perfectly inelastic

A

vertical line
once you cant afford a good demand goes to 0

38
Q

percent change

A

(new value-old value)/old value

39
Q

how to calculate elasticity with percent change

A

percent change in quantity/percent change in price

40
Q

midpoint formula

A

(Q2-Q1/average)/(P2-P1/average)

41
Q

if percent change in quantity is greater than that of price then

A

it is elastic
relatively reactive

42
Q

if percent change in quantity is less than that of price then

A

it is inelastic
relatively non reactive

43
Q

if percent change in quantity is equal to that of price then

A

it is unitary
proportionately reactive

44
Q

income elasticity of demand

A

percent change in quantity demanded/percent change in income
no absolute value, sign matters

45
Q

if income elasticity of demand is positive then

A

it is a normal good and 0-1 is inelastic and 1+ is elastic

46
Q

if income elasticity for demand in negative then

A

it is an inferior good

47
Q

cross-price elasticity

A

percent change in Q demanded of good A/percent change in price of good b
sign matters
positive=substitutes
negative=compliments

48
Q

rule of 70

A

70/percent growth per year = how long it will take an investment to double

49
Q

compound growth formula

A

start value(1+rate)^time=end value

50
Q

normative

A

should

51
Q

positive statement

A

facts

Econ midterm 1 (1 decks)

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