Exam 1 Flashcards
Microeconomics
Part of economics concerned with single factors and the effects of individual decisions
Individual
Macroeconomic def
Part of economics concerned with large scale or general economic factors
Like interest and national productivity
Large scale
Positive economics is
Object and fact based
Statements can be tested, proved, disproved
Normative economics is
Subjective and value based
Statements are opinion based
Demand variables
What are they
Desires Scarcity Opportunity cost Marginal cost Priorities
Law of demand
There is an indirect relationship between the price of a product and the quantity demanded
Inverse relationship of P and Q demanded
One increase other decrease
Determinant of demand
Population
Income
Taste and preference
Price of substitutes and complements
Demand shifts
Shift left is decrease
Shift right is increase
5 factors of production
Land Labor Capital Entrepreneurship Knowledge
Exchange theory:
Voluntary
Exchanges
Voluntary Transaction
Gift/credit exchange
Voluntary transaction
Both people benefit
D+ +D
Both benefit
Gift/credit exchange
D+ +D
(Future return)
Involuntary exchange
Force
Fraud
Forced exchange ex)
- (“). (“)+
- S —————> +D
Forced to give
Fraud exchange example
+D
Someone gives faulty check to buy car
Opportunity cost
The next best thing you must give up to get something else
Law of supply
Direct relationship between price and quantity supplies
Direct relationship between price and quantity
Profit equals
Revenues - expenses
P= R-E
Price - cost =
Profit if positive
Loss if negative
Rising cost would mean
Lowering cost would mean
Supply would go down
Shift left
Supply would go up
Shift right
Surplus is when
The new shift in supply or demands is above the new equilibrium created
Shortage when
New supply or demand shift is under the new created equilibrium
Economic spectrum
Pure market economy
Mixed economy
Pure command economy
Pure market economy (PME)
Zero percent govt control
Pure command economy
100 percent government control
Government interventions
Subsidies and taxes
Quantitative restrictions
Quota and license
Price control
Legal max (ceiling) legal min (floors)
Prohibition and compulsions
Black market
Subsidies and taxes cause
Shifts in demand or supply
Quantitative restrictions are
Quotas and requiring licenses
It raises prices artificially
Price control example
Legal max is called ceiling
Legal minimum is called floor
Prohibition and compulsion causes
Black markets
Caused by laws and regulations
What happens in 1919 for Us wheat and farmer
1918 is the start of ww1 and during the war the demand of US wheat increased
Shifted demand right
What happen in 1919 for us wheat and farmer
Ww1 end
What happen in 1920 for us wheat and farmer
Improvement in farm productivity because of improved technology after war
Shifts supply right
What happens in 1929 in us wheat and farm
Hoover implements farm stabilization act to restore golden era (1914) by otherizing purchase of wheat
People have no money to purchase cause depression
Fails
What happen in 1933 for us wheat and farmer
Agriculture adjustment act with FDR
USDA- implements
Storage of wheat, pay farmers not to grow, paid to destroy
In order to drive prices of wheat up
1950 solid banks (mandatory)
Winners and losers of wheat and farming
Winner
Farmer, govt agency, storage comp., farm equipment comp, politician
Lose
Consumer
Taxpayer
Farm bill
Cause
Storing
Destroying
Pay not to produce
Ban import
Congress has what inside it
Senate 100 (2 each state)
HoR 435
Congress 535 electoral votes
What are the 5 lobbying effects
Senate effect
House effect
Seniority
Special interest
Logrolling
Senate effect
Is what
Ex)
NY pop 1000 gets 2 vote for senate
KS + C pop 500 gets 4 votes for senate
Urban city are out represented then rural areas
Therefore more effected lobbying of rural place
House effect
Ex)
Kansas
Four district 1 urban 3 rural
Urban more pop then all 3 rural combined
Urban gets 1 vote compared to 3 rural farm district
Move to diff city vote don’t change
Seniority what is
Seniority
How much time you were in office
Get more power cause more known
Urban- many changes in city, no seniority build up (nobody know)
No re elected
Rural- less change in rural, so seniority advantage (people know you) re elected
Special interest what is
Politician raise price 1 cent to wheat bread ( promise to farmer to get vote) –> consumer many buy –> increase food tax —> becomes subsidies to farmers —> farmers give some of earning to politicians as campaign contribution
Logrolling what is
It is when a politician puts
Your interest in my bill if you vote for me
You scratch my back I scratch yours
NYC 1937
Birth of the medallion system
Medallion system what is
It puts a quota to how much taxi there can be in the city or area
Cost really cheap at first– like 10 dollar per — but now it can sell to 1 million per medallion
What did medallion system do?
Caused a quota to cabs driving
Raised price for consumers
Some consumer lost service cause of price
Who win and lose
Win
Original can owner, govt agency (enforce rule, bigger budget), alternative transportation (people not ride cab), banks (get business bc of calaterall from cab owner)
Lose
Consumer (pay more-high income, lose service-low income), potential owner (get alt employment, be gypsy), taxpayer of medallion
Washington have no medallion system
Soo
Lower price
Easy to get in and convenient
Easy for new comer to join job
Ownership by ethnicity change (diverse)
NYC IS OPPOSITE
high price
Hard to get in
Hard for new
Ownership by same person
Medallion and banks
Owner give medallion to bank as callateral
Banks give owner money (loan)
You do some big project and get the title back
Iron triangle what is
Special interest group: taxi owner
Taxi owner – give money–> politician –> give taxpayer money to govt agency
–> enforce bill and give benefit to taxi owner
What happens if wage increases to labor
If wage goes up there is more unemployment
Which is a surplus supply of workers
A lot of potential workers but little demand bc of higher medium wage
Minimum wage causes a
Legal min on the graph
It puts a floor
On graph of minimum wage increase
There is a legal min
Surplus of unemployed
Workers who keep jobs at higher wage are to the left
Potential workers are to the right
Employees who keep job at higher wage have what characteristics
High Performance Productivity Education Experience Likely to keep men Older Seniority
Employees who let go or not hired sat lower wage have what characteristics
Low Performance Education Experience Less seniority Younger Diff ethnicity Women
Walter Williams case study
Employee a and employer b
A com and B comp
6/hrs and 8/hrs
W+M and just M
Product A and Product B
Cheaper and more expensive
Consumer purchase A
S Africa study is what
1 skilled worker can be hired over 3 unskilled workers because of minimum wage
Pay 50 for good
Or pay 17x3 51 for unskilled
Minimum wage rise
Skilled guy keep job without fear to loosing for unskilled
Career ladder what is
People are usually paid on job to get skills to move up the career ladder 1-10
Some people who pay school to get skills get directly higher on the career ladder 10
