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Econ Exam 1 > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

What is Econ?

A

The social science that desks with how individuals, house holds, firms and countries make choices under scarcity.

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2
Q

What is scarcity?

A

People have unlimited wants and limited resources.

Scarcity is why we make choices.

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3
Q

What is micro Econ?

A

The small picture

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4
Q

What is macro Econ?

A

Big picture, unemployment inflation, GDP

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5
Q

What’s a positive?

A

Something that’s stated as a fact and can be proven

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6
Q

What are the factors of production?

A

Labor, capital, land and entrepreneurship

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7
Q

Labor earns?

A

A wage

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8
Q

Land earns?

A

Rent

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9
Q

Entrepreneurship earns?

A

Profit

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10
Q

Capital earns?

A

Interest

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11
Q

What’s a trade-off?

A

Making a decision to do one thing rather than another

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12
Q

What does PPF stand for?

A

Production possibility frontier curve

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13
Q

What does it mean when a point is attainable on the PPF?

A

That it is on the frontier

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14
Q

What does it mean when a point is ineffective?

A

When it’s inside the frontier

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15
Q

Marginal benefit =

A

Marginal cost

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16
Q

What’s the best point on a PPF?

A

An allocative efficiency

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17
Q

What’s comparative advantage?

A

Person with the lowest opportunity cost

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18
Q

What’s opportunity cost?

A

What you must give up to get something else or the next best alternative.

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19
Q

What’s absolute advantage?

A

A person or country has an absolute advantage when it can produce more of a good or service.

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20
Q

What’s comparative advantage?

A

A person or country has a comparative advantage in producing a good or service when they have the lower opportunity cost.

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21
Q

Opportunity cost equation?

A

Loss
———
Gain

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22
Q

What’s the Law of demand?

A

There is a negative or inverse relationship between price and quantity demanded.

The demand curve is downward slopping

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23
Q

What’s the market demand?

A

Is the total amount of goods and services that all consumers are willing and able to purchase at a specific price in the marketplace.

24
Q

When the demand decreases, what’s happens to price and quantity?

A

They both decrease

25
Q

What happens to price and quantity when demand increases ?

A

They both increase

26
Q

What are Shift factors for the demand curve?

A
  1. A change in income
  2. A change in taste or preferences
  3. A change in price of a related good
  4. A change in population
  5. A change in the expectations
27
Q

What factors shift the supply curve?

A
  1. Change in the price of inputs
  2. A change In the price of goods related in production
  3. A change in technology
  4. A change in the state of nature
  5. A change in the number of supplies
  6. A change in expectations
28
Q

What are complement goods?

A

Are goods you can consume together

Example: a patty and a burger bun
A sausage and a sausage bun

29
Q

What are substitute goods?

A

Goods you can substitute for or consume in place of a good you normally consume.

Example: chicken over beef

30
Q

What’s a normal good?

A

A good you consume more due to an increase in your income

31
Q

What’s an inferior good?

A

A good you consume less of when your income increases

32
Q

What’s the law of supply?

A

There is a positive relationship between price and quantity supplied.

The supply curve is upward slopping.

33
Q

What happens to price and quantity when the supply curve moves?

A

Price and supply are opposites, if one increases the other one decreases.

Supply and quantity are equal. Wherever supply moves quantity moves.

34
Q

What is equilibrium?

A

When Quantity is supply and quantity of demand are the same, when the graphs meet.

Qs=Qd

35
Q

What’s a price ceiling?

A

When the government believes the price of a good is too high the set a price ceiling.

It Is a legally binding below equilibrium.

Price ceiling = shortage

36
Q

What is a price floor?

A

When the government believes that the price of a good is too low it sets a price floor.

A price floor is a legally binding above equilibrium.

Price floors = surplus

37
Q

What’s the GDP equation?

A

GDP= C + I + G + ( X-M)

Income approach sums income

38
Q

What are limitations of GDP?

A

Black market
Leisure time
Household production

39
Q

What happens to net exports and GDP when imports increase?

A

Both net exports and GDP both decrease.

40
Q

What is real GDP valued at?

A

Valued at based year prices

41
Q

What is nominal GDP valued at?

A

Valued at current year prices

42
Q

How do you calculate real GDP?

A

Base year price X current year quantity

43
Q

How do you calculate nominal GDP?

A

( price X quantity) for all goods and add them up.

44
Q

How do you calculate gross investment?

A

You add net and depreciation

45
Q

What are the faces of the business cycle?

A

Expansion - when it’s increasing
Peak - at its highest point
Recession - when it’s decreasing
Trough - at its lowest point

46
Q

What is the labor force? Who is it made up of?

A

All employed + the unemployed

47
Q

What is frictional unemployment?

A

People who left their job, quit or were fired and are looking for another job in their field.

48
Q

What is structural unemployment?

A

A person who lost their job because they were replaced with some type of technology.

49
Q

What is cyclical unemployment?

A

A person who lost their job because of lay-offs or the company going out of business.

50
Q

How do you calculate the unemployment rate ?

A

The number of unemployment
————————————— X 100
The labor force

51
Q

How do you calculate the labor force participation rate?

A

Labor force
————————————— X 100
The working age population

52
Q

How do you calculate the employment to population ratio?

A

Number of employed
——————————— X 100
Working age population

53
Q

What’s the definition of inflation?

A

An increase in the general price level

54
Q

How do you calculate the CPI?

A

Price of the MB ( current year)
————————————— X100
Price of the MB ( base year)

MB stands for market basket

55
Q

How do you calculate the inflation rate?

A

CPI this year - CPI last year
———————————— X 100
CPI last year

Econ Exam 1 (1 decks)

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