Exam 1 Flashcards by Bennie Williamson

People and the choices they make in a world of scarce resources

Economics

How well did you know this?

Not at all

Perfectly

How people make decisions given scarcity

Economics

How well did you know this?

Not at all

Perfectly

A world of ____ resources with _____ wants

limited

unlimited

How well did you know this?

Not at all

Perfectly

The study of the economy at small scale level

Microeconomics

How well did you know this?

Not at all

Perfectly

The study of the economy at large scale level

Macroeconomics

How well did you know this?

Not at all

Perfectly

___ looks at the whole forest while __ looks at individual trees

Macro

Micro

How well did you know this?

Not at all

Perfectly

Micro or Macro

The effect of higher cigarette taxes on the quantity of cigarettes sold

Macro

How well did you know this?

Not at all

Perfectly

The effect of higher income taxes on the total amount of consumer spending

Macro

How well did you know this?

Not at all

Perfectly

The reasons for the economies of East Asian countries growing faster than the economies of sub-Saharan African countries

Macro

How well did you know this?

Not at all

Perfectly

Any item (whether it is found in nature, something already produced, or any human effort) that is used to produce a good or service

Anything used to make something else

Resource

How well did you know this?

Not at all

Perfectly

The foundation of all productive activity

Resources

How well did you know this?

Not at all

Perfectly

Four types of resources

Land
Labor
Capital
Entrepreneurial ability

How well did you know this?

Not at all

Perfectly

Any/all natural resource that we use in production

Ex. Trees, water, sand, minerals, oil, animals

Land

How well did you know this?

Not at all

Perfectly

Any physical or mental activity devoted to produce goods or services

Ex. People

Labor

How well did you know this?

Not at all

Perfectly

Ex. tools, machine, factories, knowledge

Capital

How well did you know this?

Not at all

Perfectly

Tangible items

Ex. tools, machines, buildings

Physical Capital

How well did you know this?

Not at all

Perfectly

Intangible items

Ex. education, skills

Human Capital

How well did you know this?

Not at all

Perfectly

The talent or ability to be able to combine the other resources in order to produce something

Entrepreneurial ability

How well did you know this?

Not at all

Perfectly

The value of your next best alternative or the value you give up in order to get something you want

Opportunity Cost

How well did you know this?

Not at all

Perfectly

There is no such thing as a free lunch means?

There is no such thing without an opportunity cost and there will always be resources used

How well did you know this?

Not at all

Perfectly

Additional benefit associated with one more unit of activity

Marginal benefit

How well did you know this?

Not at all

Perfectly

Additional costs associated with one more unit of activity

Marginal Cost

How well did you know this?

Not at all

Perfectly

The more production you have, the less…

resources you have to create a good or service (price goes up)

How well did you know this?

Not at all

Perfectly

MB: As our quantity goes up…

each additional unit brings us less benefit of a price

How well did you know this?

Not at all

Perfectly

MB: If price goes up..

quantity goes down

MC: As quantity goes up...

price or cost also rices

MC: Each additional unit becomes...

more costly

Where the two curves of MB and MC cross

Optimal level

The stable point where people don't want to change

Equilibrium

Production Possibilities Frontier Line meanings: On the right of the line is: On the line is: On the left of the line is:

Right: impossible production On the line: possible and efficient Left: possible but inefficient

All points of production on the frontier that opportunity cost is the same

Constant Opportunity Cost

Calculating opportunity cost

Option 1 - option 3 where one column of each is zero

The ability to produce a good or service at a lower relative opportunity cost than someone else

Comparative Advantage

To tell us how goods, resource, services flow back into the economy

Circular Flow Model

Any place or mechanism where buyers and sellers are brought together to trade goods, services, and resources

Market

Who sets prices

The market

What slope is a demand curve

downward-sloping

3 reasons demand slopes down

Income effect Diminishing Marginal Utility Substitution Effect

As the price of something goes down, the purchasing power goes up

Income effect

The amount of benefit decreases

Diminishing Marginal Utility

If the price of something increases, you can buy something cheaper

Substitution Effect

All the buyers added together

Market Demand

How does quantity demand change

if the price changes

How does a change in demand happen

When a non-price variable changes

Parallel shift to the right

Increase in demand

Parallel shift to the left

Decrease in demand

Determinants of Demand

- Taste and Preferences - Number of Buyers - Expectations

Any good, service, or resource that is viewed as a replacement for another

Substitutes

Goods that are used or consumed together

Complements

Good that has a direct relationship between income and demand

Normal good

Good that has indirect relationship

Inferior good

A payment made to the government that is a result of some economic activity

Tax

A payment made by the government that doesn’t require any economic activity

Subsidy

A maximum legal price at which a good, service, or resource can be sold

Price Ceiling

Binding Price Ceiling means

Price is below equilibrium and shortage will occur

Non-binding Price Ceiling means

Price is above equilibrium but will most likely go to equilibrium

A minimum legal price at which a good, service, or resource can be sold

Price Floor

Quantity demanded comes from

Businesses

Quantity supplied comes from

Workers

Tax Revenue =

Tax amount * Qt

The difference between the maximum price consumers are willing and able to pay for a good or service and the price they actually pay

Consumer Surplus

The difference between the price producers receive for a good or service and the minimum price they are willing and able to accept

Producer Surplus

Everything below the demand curve and above the price

Consumer Surplus

Distance between the minimum they are willing to accept and the price of the good Everything above the supply curve and below the price

Producer Surplus

The sum of the consumer and producer surplus

Economic Surplus

The value of economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium

Deadweight Loss

A market in which the demand and supply curves represent the benefits and cost to the consumers and producers in the market

Private Market

The cost to the producer of an additional unit of a good or service

Private Marginal Cost

The benefits to the consumer of an additional unit of a good or service

Private Marginal Benefit

The cost of an additional unit of a good or service that is imposed on people other than the producer

External Marginal Cost

The cost to society in producing an additional unit of a good or service

Social Marginal Cost

The benefit of an additional unit of a good or service that is enjoyed by people other than the direct consumer of the good or service

External Marginal Benefit

The benefit to society of consuming an additional unit of a good or service

Social Marginal Benefit

Demand curve that only considers the private benefits of this consumption

Private Demand

Demand that looks at both the private and external benefits of consumption

Social Demand Curve

The supply that affects only the private cost of this production

Private Supply

The supply that affects both private and external costs

Social Supply

Any good or service that is both nonrival and nonexcludable

Public Good

The characteristic of some goods or services whereby the consumption of the good or service by one person does not diminish the amount available to someone else

Nonrival Ex. Internet

A characteristic of some goods or services whereby people cannot easily be prevented from consuming the good or service, even if they don’t pay for it

Nonexcludable Ex. Fireworks