Economics Flashcards
When could measuring effort by the amount of time doing something be unfair?
When there is an inequality of opportunity, so some people are unable to put in the same amount of time due to other external factors
What is a way to get around measuring effort by time put in when there is an inequality of opportunity?
Measure their effort relative to other people with similar circumstances
What does equal opportunity look like when measuring by relative effort?
The top people in each circumstance is given the same reward
What are the causal effects of a place?
Places with more opportunities will result in higher income for a child when they grow up. This effect decreases as the age when they moved decreases. The opposite effect is also true when moving to a place with lower opportunities
What are the three problems economics must adress?
What to produce, how to produce and for whom to produce
How does the market solve the three basic economic problems?
By matching supply and demand in each market
What issues in a market economy may a government try to address?
Inefficiencies caused by imperfect competition, externalities or public goods
Inequalities
Macroeconomic problems
Nondiscrimination definition of equality of opportunity
Individuals should be judged only on attributes relevant to the performance of the duties of the position in question
Level the playing field definition of equality of opportunity
Society should do what it can to level the playing field among persons who compete for positions, especially during their formative years, so that all those who have the relevant potential attributes can be considered
Circumstances
The set of characteristics that are out of a person’s control and affect the probability of achieving a certain outcome
Issues with the equality of opportunity definition
What is a circumstance?
Do we compensate for every circumstance?
Incentives
Preferences and choices
How did Chetty control variables to ensure that place has an effect on outcomes?
Looked at people who moved exactly once
What are some conclusions about causality from Chetty’s experiment?
Areas that are racially segregated or geographically isolated from jobs tend to causally limit upward mobility
Areas with high degrees of economic inequality tend to causally limit upward mobility
Areas with better schools have more upward mobility
Better social capital is associated with more upward mobility
Lower rates of marriage are associated with causally lower economic opportunity
Demand curve
The relationship between market price of a good and the quantity demanded of that good, ceteris paribus
Law of downward-sloping demand
When the price of a commodity is raised, buyers tend to buy less of the commodity. When the price is raised, quantity demanded increases
Determinants of market demand
Average income
Size of the market
Related goods
Tastes or preferences
Special influences
What causes shifts in demand?
When there are changes in factors other than a good’s own price which affect the quantity purchased
Supply curve
The relationship between a product’s market price and the amount of that commodity that producers are willing and able to produce and sell
Determinants of market supply
Cost of production
Technological advances
Price of related goods
Government policy
Special influences
What causes shifts in supply?
When changes in factors other than a good’s price affect the quantity supplied
Market equilibrium
The price at which quantity demanded equals quantity supplied
Incidence
The stakeholder that ultimately benefits/pays for a policy
What is the supply curve for housing like?
Practically perfectly inelastic in the downward direction, can be elastic or inelastic in the upward direction
