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Microeconomics > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

economics

A

knowledge concerned with production, consumption, and transfer of wealth

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2
Q

what is econ logic

A

1)people are rational: consumers want to maximize happiness
2)people respond to economic incentive
3)margin:decision making dynamically

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3
Q

what three questions does any society have to face

A

1)what to produce
2)how to produce it
3)who are they producing for

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4
Q

what are wants bigger than in econ

A

needs. in market context firms make money by giving people what they want

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5
Q

what type of market does the USA have

A

mixed market

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6
Q

what type of market is where the government provides the goods and service

A

socialism

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7
Q

what is marxism

A

who can own capital? basic theory of communism

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8
Q

opportunity costs

A

no matter how much money you have you cant have everthing, so you have to make choices which is scarcity

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9
Q

opportunity cost is bascially

A

what you give up

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10
Q

for PPF any point on the line is

A

possible/efficient

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11
Q

for PPF any point inside the line is

A

inefficient

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12
Q

for PPF any point outside the line is

A

not possible

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13
Q

what does slope represent in PPF curve

A

opportunity costs

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14
Q

what are the two views in econ

A

positive and normative

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15
Q

what is a positive view in econ

A

testable statements (may not be true)
-concerned with what is

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16
Q

what is a normative view in econ

A

this should be this way/not that way
-concerned with what ought to be

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17
Q

what results from an increase in stuff

A

1)econ growth 2) technlogical change 3)trade

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18
Q

what is econ growth

A

makes everyone better off b/c there is more stuff. Happier society. Smooth

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19
Q

what is technological change

A

more disruptive, less smooth compared to econ growth.

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20
Q

ex of technological change

A

transfer from combustion vehicles to electric cars

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21
Q

what results from doing something at the lowest opportunity cost

A

more stuff

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22
Q

tarriffs

A

importing taxes

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23
Q

demand

A

buying/purchasing side of the relationship

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24
Q

supply

A

producing/selling

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25
Q

what does demand help determine

A

amount people want to buy not how much people buy

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26
Q

what is an actual number and repreents the amount people want to buy?

A

quantity demanded

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27
Q

what are variables that shift market demand

A

-income
-prices of related goods
-tastes
-populations and demographics
-expected future prices
-natural disasters and pandemics

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28
Q

demand curve

A

shows relationship between the price of a product and the quantity of the product demanded

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29
Q

law of demand

A

inverse relationship between the price of a product and the quantity of the product demanded

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30
Q

income

A

income that consumers have available to spend effects their willingness and ability to buy a good

31
Q

substitutes

A

goods and services that can be used for the same purpose

32
Q

compliments

A

goods and services that are used together like hot dogs and hot dog buns

33
Q

what is quantity dependent on

A

price of the good (price is independent)

34
Q

does demand move on a graph

A

no just quantity demanded

35
Q

what are variables that shift market supply

A

-prices of inputs
-technological change
-prices of related
-goods in production
-number of firms in the market
-expected future processes
-natural disasters

36
Q

law of supply

A

firms produce more as prices go up

37
Q

neo-classical

A

supply and demand are the driving force behind goods and services

38
Q

austrian

A

interest rates determined by opinion of how individuals spend money

39
Q

how does demand work on a graph

A

it is a pull, pulls things up and down

40
Q

how does supply chain work on a graph

A

it pushes things
it s goes up P and Q go down. if s goes down P and Q go up

41
Q

what is producer surplus

A

selling things for more than what the firm originally intended

42
Q

surplus

A

too much of something

43
Q

shortage

A

not enough of something

44
Q

price floor

A

floor because price cant go under it (hitting the floor), sits higher on graph than ceiling

45
Q

price ceiling

A

the mandated maximum amount a seller is allowed to charge for a product or service

46
Q

consumer surplus

A

benefits consumer because price they are paying for product is less than what they were willing to pay

47
Q

formula for consumer/producer surplus

A

area of a triangle

48
Q

federal reserve

A

Private bank privately run (not government). It is a bankers bank or bank for banks

49
Q

reserve requirement for federal bank

A

20%

50
Q

save rate for federal bank

A

1%

51
Q

house loan rate for federal reserve

A

7%

52
Q

car loan rate for federal reserve

A

10%

53
Q

what are most of the loans done by federal reserve

A

house and car loans

54
Q

Federal Open Market Committee

A

group that dabbles in bond market: buy bonds banks and holding

55
Q

market failures

A

demand supply model does not hit social optimal

56
Q

causes of market failure

A

externalities and public goods

57
Q

what is externality

A

benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service

58
Q

example of externality

A

pollution

59
Q

example of negative externality on the demand side of the makret

A

being able to smoke in any room

60
Q

coase theorem

A

face deficiencies during externalities

-there are complete competitive markets with no trasnsaction costs and an efficient set of inputs and outputs an optimal decsion will be selected

61
Q

what are the two features of pure private goods

A

exclusive and rival

62
Q

what is exclsuive

A

easy mechanism to exclude someone frm having good (usually price)

63
Q

what is rival

A

less of something from someone else

64
Q

freerider

A

someone who benefits form good without putting money in

65
Q

Lindahl

A

if you know peoples willingness to pay, charge that amount

66
Q

consumption externalities

A

consuming a good causes either a positive or negative externality to a third party

67
Q

elasticity

A

measure the responsiveness of quantity demanded and quantity supplied to changes in market price

68
Q

does time make something more elastic

A

yes, more options after more time

69
Q

does the availability of substitutes impact elasticity

A

yes, more substitutes, more elastic

70
Q

does budget impact elasticity

A

yes, smaller share of an item in one’s budget ,more price inelastic demand is likely to be

71
Q

price elasticity of demand formula

A

% change in quantity demanded/% change in price

72
Q

demand is elastic

A

QD is responsive to changes in price, % change in quantity demanded will be greater than % change in price, and price elasticity of demand is greater than the absolute value of 1

73
Q

unit elastic

A

if price elasticity is equal to 1

74
Q

does more elasticity increase surplus

A

yes

Microeconomics (25 decks)

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