Economics Flashcards
A pizza oven is best described as which type of factor of production?
capital
Flashcards cost $15. Using flashcards results in your not earning $20 in income. What are the accounting, opportunity, and economic costs respectively?
$15. $20, and $35`
Coal is an example of what type of resource?
land resource or natural resource
A wage is the price paid for what type of resource?
Labor
A carpenter uses several tools to make a table out of wood. The tools are an example of what type of resource?
capital
The value that is forgone when a choice is made is what type of cost?
opportunity cost
Labor resources are sometimes called “_________ capital.”
human
What is the term for goods that are used to produce other goods?
capital
A person who starts a small business is providing what factor of production?
entrepreneurial resources
Air is best described as which type of resource?
land resource (or natural resource)
What is a free good?
A non-exclusive, non-limitable good: something that one has unlimited access to that everyone can have at the same time, i.e. air.
The term “natural resource’ is another name for which factor of production?
land
The decision-making involved in using resources is what type of factor of production?
entrepreneurial
an office building is best characterized as what type of resource
capital
mike is a farmer who wants to plant several crops but has only enough to plant one. mike is facing what economic problem
scarcity
noah decided to order a hamburger instead of a hotdog, the value of the hamburger is the _____ cost of his decision
opportunity
land, labor, capital, and entrepreneurship are the four ___ of production
factors
bill gates and demidec have this factor of production in common
entrepreneurship
the workers on an assembly line represent what factor of production
labor resources
the letters TANSTAAFL stand for what economic principle
there aint no such thing as a free lunch
which factor of production can best be said to consist of “things used to make other things”
capital
an oil reserve is what type of factor of production
a natural resource
vehicles and buildings are examples of what factor od production
capital
what are the four factors of production
land, labor, capital, entrepreneurship
which factor of production involves organizing the other three factors into production
entrepreneurship
a river is an example of which factor o production
land
humans have (unlimited/ limited) wants, but the earth has (unlimited/limited) resources
unlimited, limited
define opportunity cost
the value of the next best alternative
what is a capital good
a good that helps make other goods later that can be used repeatedly
what do you call a person who takes advantage of free public goods without paying for a them
a free rider
although naturally found, coal as an intermediate good is this type of factor of production
capital
what is the basic economic problem
scarcity
what is the name of adams smiths most famous book
an inquiry into the nature and causes of the wealth of nations (or just the wealth of nations)
this occurs when there just arent enough hours in the day
scarcity
one must determine this, or the value of his next best alternative when making a decision
opportunity cost
why does scarcity exist
people have unlimited wants and earth has limited resources
what does a production possibilities frontier represent
all the efficient and attainable combinations of the production of two goods
when a producer decides to move from one point on his ppf to another point, what type of decision is he making
a trade off decision
what are two properties of every point along the production possibilities frontier
efficiency and attainability
what are twi qualities of any point between a production possibilities frontier and the origin
all points in this region are attainable but inefficient
what can we infer about two goods when their production possibilities frontier is nearly a straight line
the resources used to produce one good are close, efficient substitutes for the resources used to produce the other
what does the economic cost of a decision include
the explicit costs and the implicit costs
what is a free good
a resource that nonrival and non excludable
on a ppf for guns and butter, what type of goods does butter represent
consumer goods
what law explains the shape of a typical production possibilities frontier
the law of increasing opportunity costs
what is the future consequence of a decision
the result that occurs after the present consequence
which points on the production possibilities frontier have the highest opportunity costs
the endpoints, where all resources are used to produce only one good or the other
what is the intended consequence of a decision
the desured result of a decision, the reason the decision is made
what would cause an economic decision to be difficult to make
if there were only a very small difference between the benefits and the costs of the alternative
what is the unintended consequence of a decision
the unwanted and unexpected result
what is the present consequence of a decision
the result that happened when the decision is made
what type of consequences would a president facing reelection most be concerned with in regards to his actions
the present consequences
what factors of production are human resources
labor and entrepreneurship
which factor of production includes human capital
labor
which two factors of production are non human resource
land and capital
what is a trade off
a decision to give up something in order ot have something else
what is the basic economic problem
scarcity
in a market economy, who or what answers the question of how to produce
market forces
in a mixed market economy, who or what answers the question how to produce
either by a central authority or by market forces
in a command economy, who or what answers the questions how to produce
a central authority
do economists think that people act out of self interest
hell yea
many production possibilties frontiers compare the production of capital and ____ goods
consumer
true or false: self interest is the same as selfishness
nah son
self interest is a result of the value of (public/ private) property
private
when a nation moves from one point on its production possibilities curve to another, what is it doing
making a trade off between two equally viable and efficient production combinations
what does it mean to produce a t a point within the production possibilities curve
not all resources are being used efficiently; the economy could produce more but is not doing so
describe the shape of a production possibility curve for two goods that use the same productive inputs
a straight line
why does the production possibility hcurve have a downward slope
any increase in the production of one good decreases the production of another
Which country is the world’s largest exporter of corn?
the U.S.
How does a market price act as a signal to producers
by signaling that profit can be made
Why might two countries trade when they can each produce the same good for the same relative price?
They can probably benefit from trading other goods
What is an absolute advantage
the position of an individual or a nation that can produce a good with the fewest inputs
what basic concept underlies the theory of trade
comparative advantage
if price elasticity of demand is equal to zero, then demand is…
THIS IS A TRICK QUESTION. ped can never equal zero
what is commodity money
a form of money that people value both because it serves as a medium of exchange and because of its intrinsic quality
what is the relative price of a good
the opportunity cost of producing it, expressed in units of the next best alternative good
what is the major reason that an assembly line can produce an automobile faster than a group of individuals who work in a small garage
In the assembly line, each worker is a specialist in a particular part of the production process
what conditions must be met in order for the barter to occur
all participating parties must expect to gain and there must be a double coincidence of wants
what is a subsidy
a payment from the government to an individual or group to encourage or support production but without any anticipation of production in return
what is a quota
a limit on the quantity of a good that may be imported or exported
what are complementary goods
goods that are purchased together such that the demand for one can directly affect the demand for the other. the classic example: hot dogs and hot dog buns
what is a tariff
a tax on an imported good
what is token money
money whose face value is greater than the cost of producing it
What happens to total world output if every nation specializes in the goods in which it has a comparative advantage
total world output increases
The (supply/demand) curve for a profit-maximizing firm is equal to its rising marginal cost curve.
supply
The law of demand states that quantity demanded is (directly/inversely) related to price.
inversely
How are exchange rates determined?
Supply and demand for both currencies naturally sets an equilibrium price.
The Paris Conference of 1867 set most of the world on a ____ exchange rate system based on the ____ gold standard.
fixed, gold
One ice cream cone may be very satisfying. The next ice cream cone will probably be less so. Ten ice cream cones would probably make a person sick. This example illustrates what economic law?
the law of diminishing marginal utility
Complementary goods have a (positive/negative) cross-price elasticity.
negative
You can sell 10 hockey pucks at $5 each or 9 hockey pucks at $6 each. Demand in this price range is (elastic/inelastic).
inelastic; $54 is more than $50
Suppose that the price elasticity of demand of bread is 0.2, and the price of bread increases by 10%. What will happen to the quantity demanded of bread?
It will decrease by 2%.
If the cross-price elasticity between two products is negative, what can be said about the two products?
They are complements.
If the cross-price elasticity between two products is positive, what can be said about the two products?
They are substitutes.
If a change in price has no effect on the quantity demanded, demand is completely (elastic/inelastic).
inelastic
What type of elasticity represents the relationship between the demand for one product and the price of another?
Cross-price elasticity.
If demand is elastic, what does this mean for the price elasticity of demand?
The price elasticity of demand is greater than one.
What is marginal utility?
the value of consuming an additional unit of a good or service
Why can’t a supply curve extend infinitely to the right?
At some point, producers will not have enough resources to produce additional units of a good or service, no matter how high the price.
The downward slope of the demand curve is explained by the law of ______ marginal utility.
diminishing (or decreasing)
In a graph of supply and demand, what does the vertical axis represent?
price
True or false: Supply and demand curves are always straight lines.
False (but they are usually drawn as straight lines in economics textbooks)
The law of diminishing marginal utility helps to explain the law of (supply/demand).
demand
Spaghetti and tomato sauces are (complements/substitutes).
complements
What factors affect the supply of a good or service?
productivity changes, taxes, subsidies, expectations, regulation. the number of sellers
What factors affect the demand of a good or service?
the number of buyers, consumer, income, tastes and preferences, consumer expectations, the prices of complements and substitute
You can sell 10 hockey pucks at $5 each or 9 hockey pucks at $6 each. Demand in this price range is (elastic/inelastic).
inelastic; $54 is more than $50
what is the balance of trade
the difference in value between a nation’s exports and imports
how does the concept of absolute advantage apply to international trade
it doesn’t. international trade is based on comparative advantage.
what is a resource market
a market in which resources are bought and sold
how does the division of labor save time in the production process
workers do not spend any time moving from one task to another, and each worker becomes a specialist in his particular part of the production process
when is the best time for two countries to set an exchange rate for an international transaction
at the time of the trade (in order to avoid changes in the exchange rate before the transactions occurs)
in general, what happens to people and countries who specialize and trade?
they become independent
what is an unfavorable balance of trade
a condition in which a nation imports more than it exports
what are three reasons why the division of labor is effective
tasks are assigned according to each worker’s preference and abilities, more sophisticated technology can be used, and each worker can become very good at one isolated part of the production process.
what is an embargo
a restriction on exports intended for sale in another country
what happens to total production for two nations who specialize according to their comparative advantages and then trade?
total production increases
how did many Asian economies achieve rapid economic growth in the 1970s and 1980s
their goods were competitively priced because their wage rates and capital costs were low
what is money
anything that is generally accepted in return for resources, goods. or services, or for the repayment of debts
what is a favorable balance of trade
a condition in which a nation exports more than it imports
what is the main reason that a fast food restaurant produces a meal faster than the average person can produce it in his/her kitchen
a fast food restaurant has division of labor, so large scale production machinery is practical
what is an exchange
a reciprocal transfer of money or a resource, good, or service in return for a resource, good or service
how do people and nations become economically interdependent
by specializing in the production of some goods and trading to obtain others
what is an export
a good that is produced domestically but sold to consumers in a foreign country
what is a comparative advantage
the position of an individual or a nation that can produce a good for the lowest opportunity cost
why is the concept of comparative advantage important to international trade
nations specialize in the production of goods in which they have a comparative advantage and this gives them an incentive to trade with other nations that specialize in the production of other goods
why is a barter system inefficient
finding a double coincidence of wants for every transaction is costly and time consuming
what condition must be met in order for voluntary exchange to occur
all participating parties must expect to gain
what is a trade barrier
a government imposed restriction that prevents or inhibits free trade between countries
what good was the subject of an embargo that devastated the US economy in the 1970s
oil ( the embargo was imposed by OPEC)
quantity demanded decreases as price increases because higher prices provide a (positive/negative) incentive for consumers
negative
on a graph of the supply and demand for a particular god, where is the equilibrium price found
at the intersection of the supply and demand curves
what happens to exchange quantity if there is a decrease in demand
exchange quantity decreases
as the price of a good increases what typically happens to the quantity supplied
quantity supplied increases
what is quantity supplied
the amount of a good that producers are willing and able to sell at a particular price
what is the equilibrium price of a good or service
the price at which the quantity demanded equals the quantity supplied
what happens to exchange quantity if there is a simultaneous decrease in demand and increase in supply
we cannot tell exactly
how is quantity demanded related to demand
demand is the quantity demanded at each price within a range of prices
what happens to exchange quantity if there is an increase in demand
exchange quantity increases
what area of economics explores how a firm decides what price to charge for its product
microeconomics
how do prices act as signals to consumers
they help consumers decide how best to allocate their incomes
what happens to the equilibrium price of a good if there is a decrease in supply, ceteris paribus
the price increases
as the price of a good decreases, what typically happens to the quantity supplied
quantity supplied decreases
how is an internet website an example of a market
a website may be used to bring buyers and sellers together to make an exchange
what happens to exchange quantity if there is a simultaneous increase in both supply and demand
exchange quantity increases
what happens to exchange quantity if there is a simultaneous decrease in both supply and demand
exchange quantity decreases
what is supply
the relationship between the price of a good and the quantity of it that sellers are willing and able to produce and sell
what is market demand
the sum of individual demand for every consumer in a market
what happens to equilibrium price if there is a simultaneous decrease in both supply and demand
we cannot tell exactly
what happens to the equilibrium price of a good if there is an increase in demand ceteris paribus
the price increases
what is the market supply of a good
the sum of individual supply for each supplier in a market
what happens to the exchange quantity of a good if there is an increase in supply ceteris paribus
the exchange quantity increases
what is the market clearing price of a good
the equilibrium price
the upward slope of the supply curve is explained by the law of increasing marginal…
cost
you can sell 10 hockey pucks at $5 each or 9 hockey pucks at $6 each. Calculate the PED
10% change in quantity demanded/20% change in price PED=1/2=.5
income elasticity of demand measures…
responsiveness of demand to consumer income
cross elasticity of demand measures
responsiveness of demand for a good to the price of complimentary and substitute goods
if price elasticity of demand is equal to one, the demand is…
unit elastic
if price elasticity of demand is equal to zero, then demand is…
this
what is the most important resource market in the us
the labor market
how do most economists feels about free trade
most economists support free trade
what happens to the total consumption possibilities for two nations that specialize according to their comparative advantages and then trade
total possible consumption increases
what is barter
the exchange of resources goods or services without using money
how did japan achieve rapid economic growth in the 1970s and 1980s
by training its workforce well and by applying technology
what do we use to avoid the inefficiency of a barter system
money or any other medium of exchange
what is a market
a mechanism that brings buyers and seller together for the purpose of making an exchange
what is division of labor
the act of dividing the production of a good into simple separate tasks
what is fiat money
a form of money that is only valuable as a medium of exchange not as a commodity and only because people believe the issuing government can back its value
what kind of money s paper currency
fiat money
what happens to the quantity demanded of a good as the price increases
quantity demanded decreases
what happens to the equilibrium price of a good if there is an increase in supply, ceteris paribus
the price decreases
what is demand
the relationship between the price of a good and the quantity of it that consumers are willing and able to buy
how is quantity supplied related to supply
supply is the quantity supplied at each possible price within a range of prices
what happens to exchange quantity if there is a simultaneous increase in demand and decrease in supply
we cannot tell exactly
what happens to the quantity demanded of a good as the price decreases
quantity demanded increases
why is the equilibrium price of a good sometimes called the market clearing price
because when there is an equal number of buyers and sellers, the market is said to clear
what happens to the equilibrium price of a good if there is a decrease in demand, ceteris paribus
the price decreases
what is quantity demanded
the quantity of a good that consumers are willing and able to buy at a particular price
what are of economics explores the individuals preference for a particular good
microeconomics
what is the term for a situation in which resources, goods, or services are exchanged
market
how are two boys trading baseball cards an example of a market
they are exchanging goods
what happens to equilibrium price when there is a simultaneous decrease in demand and increase in supply
equilibrium price decreases
what happens to equilibrium price if there is a simultaneous increase in both supply and demand
we cannot tell oops
what is the equilibrium quantity of a good or service
the quantity at which sellers ask the price that buyers are willing to spend
what happens to equilibrium price if there is a simultaneous increase in demand and decrease in supply
equilibrium price increases
what area of economics explores the behavior of individual producers and consumers
microeconomics
what happens to exchange quantity if there is a decrease in supply
exchange quantity decreases
what area of economics explores the components and behaviors of individual markets
microeconomics
how does a market system eliminate the need for buyers and sellers to negotiate over every individual change
with a price system
what is individual supply of a good
the supply of an individual producer
what is individual demand
the demand of one consumer for a good
quantity supplied increases as price increases because higher prices provide a (positive/ negative) incentive for producers
positive
if five dollars are worth two franc, then the ____ rate is 2.5 to 1
exchange
specialization in trade result in (increased/decreased) production
increased
when people specialize, how do they satisfy their wants and needs for goods and services they do not produce?
trade
specialization (increased /decreases) efficiency
increases
specialization (increases /decreases) dependence on the self-intrest of others.
they become interdependent
when individuals specialize, what must they do to satisfy their wants
trade
are the workers in an assembly line independent or interdependent?
interdependent
what term refers to any situation in which goods, services, or resources are exchanged?
a market
trading is simpler with money than with a better system because bartering requires a “double _____ of wants”
coincidence
what is the economic term for goods that are produced in a foreign country and purchased by domestic consumers?
imports
people tend to specialize in goods in which they have (an absolute advantage/a comparative advantage)
a comparative advantage
tim can write more flashcards per hour than sam can. Does tim have an absolute or a comparative advantage in flashcards?
Absolute (he many have a comparative advantage as well, but there is not enough information in the question to determine this)
Specialization and trade result in (increased/decreased) consumption
increased
specialization leads to (interdependence/independence)
interdependence
what is required for specialization to occur?
voluntary exchange
who experiences a greater level of interdependence: “jack-of-all-trades” or a specialist?
specialist
which is likely to require the most education and skill: division of labor or specialization?
specialization
what component of a market economy allows producers to specialize?
voluntary exchange
producers tend to specialize in the good or service that they can produce at the lowest _____ cost
opportunity
what is the economic term for good that are produced domestically and sold to consumers in another country
exports
t/f: barter requires fewer transactions than trade with the use of money?
True
What is the term for the unique type of specialization that occurs in an assembly line?
division of labor
international trade occurs when one country produces a product and (imports/exports) it to another country
exports
What is required for voluntary exchange to occur?
al participating parties must expect to benefit from the exchange
t/f: people desire money for its intrinsic value.
false
tariffs and quotas are examples of barriers to _____.
trade
what term refers to the trade of one good directly for another, without the use of money?
barter
A negative cross elasticity of demand tells us that two goods are (complements/substitutes).
complements
A positive cross elasticity of demand tells us that two goods are (complements/substitutes).
substitutes
Ticket prices go up at Clippers games, and overall ticket revenue increases at the Staples Center. This means that demand in this price range is _____.
inelastic
Prices increase on Daewoo automobiles, and quantity demanded plunges to zero. Demand in this price range is _____.
perfectly elastic
”% change in quantity divided by % change in price” is the generic formula for ________.
price elasticity of demand
If demand for a good is highly elastic, then an increase in price will _______.
significantly decrease quantity demanded
What is the formula for price elasticity of demand?
PED = % change in quantity demanded / % change in price
If price elasticity of demand is greater than one, then demand is _____.
elastic
Pens and pocket protectors are complementary goods. The supply of pocket protectors decreases. What happens to the equilibrium price of pens?
decreases - the price of pocket protectors increases, which causes the demand for pens to decrease; as a result, the price of pens decreases
What does price elasticity of demand tell us?
Price elasticity of demand tells us how much quantity demanded will be affected by a change in price.
The equilibrium point is at the intersection of what two curves?
the supply curve and the demand curve
What does it mean for a market to “clear”?
A market “clears” at the price where the quantity demanded equals the quantity supplied, so there is no surplus or shortage.
What effect does a price floor set over the equilibrium price have on a market?
Suppliers supply more, and consumers demand a lesser quantity. A surplus results.
Which two curves interest at the point of market equilibrium?
supply and demand
What does the market “do” at the point of equilibrium?
it “clears”
What is the term for the quantity at which buyers and sellers ask the same price?
equilibrium quantity
What usually results from a price floor?
a surplus
In a market, what is the “common language” that helps a buyer and seller agree on the value of the resources, goods, and/or services to be exchanged?
price
Define “market equilibrium.”
The point at which quantity exchanged equals quantity supplied.
How do price signals affect markets?
Price signals are instrumental to markets. Depending on prices, consumers decide whether or not to consume and businesses decide whether or not to produce
True or false: A market consists of an exchange that takes place at a given location and at a particular time.
False
What effect does a price ceiling set below the equilibrium price have on a market?
Suppliers supply less, and consumers demand a greater quantity. A shortage results.
A surplus is a normal result of a price (ceiling/floor).
floor
What usually results from a price ceiling?
a shortage
What do you call a buyer and a seller, exchanging resources, goods, and/or services?
a market
What effect does a price ceiling set over the equilibrium price have on a market?
none
Rent control is a price (ceiling/floor).
ceiling
To keep farmers in business, the government often sets a price (ceiling/floor) on agricultural goods.
floor
What is the common economic language that makes comparison of values easier?
prices
What determines price in free market economy?
te interaction of supply and demand
What is another term for the equilibrium price?
the market-clearing price
Does a market have to occur in a physical place?
No
Equilibrium is best represented as a (curve/straight line/single point)/
single point
What effect does a price ceiling have on demand?
none
As the price of a good increases, what happens to the quantity demanded of that good?
quantity demanded decreases
In general, as the price of a good decreases, quantity demanded of that good (increases/decreases/stays the same).
increases
As price increases, the quantity demanded (increases/decreases).
decreases
in a free market, (self-interest) results from the value of private property.
self-interest
do economists think people are selfish?
no
what law can explain the bowed-out shape of a typical production possibilities curve?
the law of increasing opportunity cost
what will cause a production possibilities curve to shift inward?
a decrease in the amount of a factor of production
what will cause a production possibilities to shift outward?
an increase in a factor of production
describe the shape of a typical production possibilities curve.
bowed outward from the origin
what must an economy do in order to consume at a point beyond its production possibilities curve?
it must engage in trade
list two qualities of the points along a possibilities curve
- all points are attainable and 2. all points are efficient
what dos PPC stand for?
production possibilities curve
what happen to a production possibilities curve when the amount of a factor of production is increased?
the curve expands outward
what happens to a production possibilities curve when the amount of a factor of production diminishes in availibility?
the curve shifts inward
in which type of economic system are all resources owned by private fims and individuals?
a pure market system
is economic regulation more likely to favor producers or consumers?
producers
what type of economic system is in place in cuba?
a mostly command/ planned system
What country has the most market-oriented economic system in the world?
the United States
what drives self-interest in a market economy?
the value of private property and ownership
if two countries have similar resources, but one has a command economic system and the other has a market system, which country will most likely have the higher income per capita?
the country with a market system
what type of firm has the greatest amount of market power?
a monopoly
what country has the most centrally-planned economic system in the world?
north korea
in which type of economic system is a person who owns no resource most likely to starve?
a pure market system
“pure capitalism” is another name for which type of economic system?
pure market economy, free enterprise system or free market system
since the former soviet union dissolved, what type of economic system has been in place in the majority of the resulting independent republics?
mixed market systems; most are trying to increase privatization
what does the herfindahl index measure?
the sales concentration among firms in a given industry; the degree of competition in the industry
In a market economy, ho is the question of “what to produce”answered?
by market forces
what is a horizontal merger?
a merger of two or more firms in the same market
What type of economic system is in place un the U.S.?
a mixed market system
What is a trade deficit?
a condition in which a nation spends more on imports than what it receives for its exports
How does an embargo differ from a tariff or a quota?
Tariffs and quotas are intended to help domestic producers, but embargoes are intended to hurt foreign consumers
How do two nations trade when they each use different currencies and different price structures?
Each nation uses an exchange rate to determine the value of its goods in terms of the other country’s currency
How do political leaders tend to act toward foreign competition with domestic industries?
Many political leaders urge other countries to engage in free trade, but promote protectionist policies in their own countries
What is a product market?
a market in which goods or services are bought and sold
What kind of money is a gold coin?
commodity money
What is a market system?
an economic system in which a group allows market forces and the behavior of buyers and sellers to influence economic decision-making
What is an import?
a good produced in a foreign country but purchased by domestic consumers
How do rational people decide how to specialize?
People specialize in the production of the good they can produce for the lowest opportunity cost
What does a price floor have on demand?
none
As the price of a good increases, what happens to the demand for that good?
nothing
Define comparative advantage
the ability of one country to produce a good at a lower opportunity cost (with a greater efficiency relative to other goods) than another country
True or False: a change in price results in a change in the quantity demanded
True
True or False: a change in price results in a change in the demand
False
A minimum wage is a price floor or ceiling
floor
Movement along the demand curve represents a change in (demand or quantity demanded)
quantity demanded
As price increases, the quantity supplied (increases or decreases)
increases
For a price ceiling to achieve its purpose, it must be imposed (above or below) market equilibrium
below
For a price floor to achieve its purpose, it must be imposed (above or below) market equilibrium
above
A shortage is a normal result of a price (floor or ceiling)
ceiling
If the government sets a minimum exchange price above market equilibrium, resulting in a quantity supplied in excess of quantity demanded, what has been imposed?
a price floor
If the government sets a maximum exchange price below market equilibrium, resulting in a quantity demanded in excess of quantity supplied, what has been imposed?
a price ceiling
What effect does a price floor set below the equilibrium price have on market?
none
prices go up on demidec CDROM software, and overall revenue stays the same. this means that demand is=n this price range is…
unit elastic
the price of one good goes up. as a result, the demand for another good decreases. what is the relationship of the two goods?
the two goods are complements
if demeand for a good is relatively inelastic, then an increase in price will
have little effect on quantity demanded
if price elasticity is less than one, then demand is
inelastic
demand increases and supply decreases. what happens to equilibrium price
increases
what are substitute goods?
goods that can replace one another or that are made with essentially the same resources
what are complementary goods
goods that are purchased together sch that the demand for one can directly affect the demand for the other. the classic exanple: hot dogs and hot dog buns
demand decreases. what happens to equilibrium quantity & price
decreases
demand increases and supply increases. what happens to equilibrium price
the change is indeterminate
the number of remote control producers shrinks. the supply of remote controls…
decreases
remote control producers learn that due to government intervention, the price of remote controls will increase in four weeks. short term supply….
decreases
what is the difference between a superior good and a normal good?
nothing- they are the same
explain the budget constraint
consumers are forced to sacrifice some wants for others because of limited income
what is a durable good
a good for which consumers have more elastic demand. if income changes or prices rise, consumers can reasonably hold off on buying durable goods, such as yachts, houses cars
after competition, what happens to demand for flashcards?
it decreases
when a person’s income goes up, he buys more tomatoes. tomatoes are what kind of good?
normal or superior goods
in which type of economic system are consumers free to buy anything they can afford?
a pure market system
what type of incentive is an individuals right to private property
positive and non monetary
prior to 1978 what type of of economic system was in place in china?
a mostly command system
what is market power?
a firms ability to raise prices without losing customers
in which type of economic system are sellers free to produce and sell anything they expect to be profitable
a pure market system
in a command economy, who or what answers the question of “who will receive the benefits of production?”
a central authority
in a mixed market economy, how is the question “what to produce” answered?
by a combination of central authority and market forces
what type of economic system was in place in the former soviet union?
a centrally-planned system
what are the three main types of economic systems?
traditional, planned/command, and mixed market systems
since 1978 what has been the general nature of the changes in chinas economic system?
the government has begun to relinquish some of its strict control and allow an increasing amount of market-oriented economic activity
what kind of of industry is most likely to be a target of economic regulation?
any industry in which a monopoly seems possible or desireable
what is a concentrated industry?
an industry in which only a few firms are responsible for the majority of sales
(Absolute/Comparative) advantages depend on relative costs.
comparative (Economics by Paul Samuelson, p835)
In a market economy, who or what answers the question of “who will receive the benefits of production”?
market forces
What type of economic system is in place in North Korea?
a mostly command system
What are the three basic economic questions that every system must answer?
What to produce (and in what quantity)? For whom to produce? How to produce?
What is the most competitive kind of pure economic system?
a market system
In a command ecnomy, how is the question of “what to produce” answered?
by a central authority
In which type of economic system are all resources owned by the public?
a command/planned system
In a market economy, what is a firm’s incentive to eliminate competition?
to increase market power
In which type of economic system do individuals have government protection for their rights to private property?
a mixed market system
In a mixed market economy, who or what answers the question of “who will receive the benefits of production”?
either by a central authority or by market forces
What is the least competitive kind of our economic system?
a command/planned economic system
What type of economic system is in place in India?
a mixed market system, largely based on tradition
what is the intended consqeuence of a decision?
the desired result of a decision; the reason the decision is made
what is the unintended consequence of a decision?
the unwanted and inexpected result of a decision
what would cause an economic decision to be difficult to make?
if there were only a small difference between the benefits and the costs of the alternatives
what is the present consequence of a decision?
the result that happens when the decision us made or soon afterwards
what type of consequences would a president facing reelection MOST be concerned with in regards to his actions?
the present consequences
what two factors of production are non human resources?
land and capital
what is a trade off
a decision to give up something in order to have something else
what is the basic economic problem
scarcity
in a market economy who or what answers the question of how to produce
either by a central authority or by market force
in a command economy who or what answers the question of how to produce
a central authority
do economists think people act out of self interest
yes
many production possibilties frontiers compare the production of capital and ……. goods
consumer
true or false- self interest is the same as selfishness
false
self interest is a result of the value of (public/private) property
private
when a nation moves from one point on its production possibilities curve
not all resources are being used efficiently the economy could produce more but it is not doing so
describe the shape of a production possibility curve for two goods that use the same productive inputs
a straight line
why does the production possibility curve have a downward slope
any increase in the production of one good decreases the production of the other
the trade off between guns and ….. is often used to refer to the choice between military and civilian goods
butter
how does the law of increasing opportunity cost affect the shape of a typical production possibilities curve
it causes it to bow outward
a graph that shows all the combinations of guns and butter that a nation can produce is an example of what type of curve
a production possibility curve
typically, a nation’s production possibility curve is bowed (inward/outward)
outward
the production possibility curve us bowed outward due to the law of (increasing/decreasing) opportunity costs
increasing
if the production possibilities of two goods can be represented graphically as a straight line what can we infer about the relationship between the two?
the two goods use the exact same combination and amount of productive inputs
the supply curve shiftsto the left. is there more or less produced at any given price?
less
true or false- a change in the price of substitute goods changes demand for a good
true
the slope of the demand curve is
negative
what is a non durable good?
a good for which the consumers have mainly inelastic demand. although income may change or prices may rise, consumers cannot sacrifice many non-durable goods
the prices of substitutes and complementary goods affect the (supply/demand) for a good
demand
cost of production affect (supply/demand) in the market for a good
supply
true or false- a change in consumer incomes changes demand for a good
true
the demand curve is the graphic representation of the demand…..
schedule
the price of the product A increases by 10% as a result the quantity demanded of a product B increases by 5%. what is the coefficient of cross-price elasticity between these two products?
.5
if demand is unit-elastic then the price elasticity of demand is equal to
one
true or false a change in the number of consumers changes demand for a good
true
ticket prices go up at lakers games and overall ticket revenue decreases at the staples center this meeands that demand in this price range is
elastic
goods and services that are purchased together are called
complements
true or false a change in consumer tastes and preferances changed demand
true
elasticity of demand is generally highly (objective/negative)
subjective
substitutes have a (positive/negative) cross price elastiticity
positive
the price of a producte changes 10% as a result the quanitity demand changes by 25% what is the price elasticity of demand?
2.5
if demand is inelastic, what does this mean for the price elasticity of demand
the price elasticity of demand is less than one
goods and services that satisfy the same want are called
subsititutes
what is marginal costs
the cost of the next unit of production
what is the term of the restriction that income places on quanitity demanded
the budget constraint
elasticity is the relationship between the change in and the change in quantity demand or supplied
price
what is the measure of the responsiveness f demand to consumer income
income elasticity of demand
in a graph of supply and demand, what does the horizontal axis represent
quanitity
What does price elasticity of demand tell us?
Price elasticity of demand tells us how much quantity demanded will be affected by a change in price.
If the price of one good rises, what happens to the demand for its complementary good?
Demand for a complement will increase.
Pens and pencils are substitutes. The price of pens decreases? what happens to the equilibrium price of pencils?
decreases, because demand for pencils decreases
Demand decreases and supply increases. What happens to equilibrium quantity?
the change is indeterminate.
Demand decreases and supply decreases. What happens to equilibrium quantity?
decreases
Demand decreases and supply decreases. What happens to equilibrium price?
The change is indeterminate.
Supply decreases. What happens to equilibrium quantity?
increases
Supply increases. What happens to equilibrium price?
decreases
Name some factors that can change supply.
changes in technology, change in the number of suppliers, change in the cost of inputs, and change in expectations of future price changes
Technology for producing remote controls improves. The supply of remote controls (increases/decreases/stays the same).
increases
Investment represents about __% of GDP in the United States.
15
How much was U.S. per capita GDP in 1998?
$31,487
Randy decides to leave his job in New York and travel to Morocco, then back to California, where he is looking for a new job. What kind of unemployment is this?
frictional
Define the labor force.
Every civilian age 16 or older who has a job or is seeking one. Military personnel and convicts do not count
What is the Labor Force Participation rate?
The percentage of the civilian population i the labor force out of everyone who could be in the labor force.
What government agency keeps track of unemployment data?
the Bureau of Labor Statistics
The Employment Act of 1946 most targeted what kind of unemployment?
cyclical unemployment
When did the Employment Act of 1946 expire?
2000
About what percentage of workers earning the federal minimum wage are 20 or older?
75%
How many times more likely is someone who has not gone to college to earn the minimum wage than someone who has graduated from college?
twice as likely
What government agency measures the Consumer Price Index?
the Bureau of Labor Statistics
What was the average inflation rate in 2004?
2.68%
True or false: full employment is 0% unemployment.
False– for instance, there is always a certain degree of frictional unemployment.
What is bullion?
precious metal
What are three common types of unemployment?
frictional, structural, and cyclical
How are the fundamental economic questions answered in a traditional economic system?
with tradition and history
At what percent unemployment is an economy said to be at “full employment”?
4%
What is a “discouraged worker”?
someone who has given up looking for work
For an individual to be considered unemployed, does he have to be trying to find a job?
yes
Who wrote The Communist Manifesto?
Karl Marx
What is structural unemployment?
unemployment that occurs when the economy (usually due to technology) changes in such a way as to decrease demand for certain skills
What is cyclical unemployment?
unemployment associated with fluctuations in the business cycle
What is the labor force?
all civilians 16 and over who have a job or are seeking one and capable of holding one–thus, for instance, not mentally disabled are part of the labor force
What is underemployment?
Being employed at a lower level than education and training suggest would be optimal – for instance, an engineer working to sell ice cream because of a decline in the availability of engineering jobs
Advertising to give your product name recognition and a unique reputation is known as _______.
branding
investment is sometimes called___ formation
capital
