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ECON 142 > Exam 1: Ch. 1, 3, 4 & 4 Appendix > Flashcards

Exam 1: Ch. 1, 3, 4 & 4 Appendix Flashcards

1
Q

Allocative Efficiency

A

A state of the economy in which production is in accordance with consumer preferences, in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society, equal to the marginal cost of producing it

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2
Q

Centrally Planned Economy

A

An economy in which the government decides how economic resources will be allocated

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3
Q

Economic Model

A

A simplified version of reality used to analyze real-world economic situations

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4
Q

Economic Variable

A

Something measurable that can have different values, such as the incomes of doctors

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5
Q

Economics

A

The study of the choices people make to attain their goals, given their scarce resources

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6
Q

Equity

A

A fair distribution of economic benefits

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7
Q

Macroeconomics

A

The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth

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8
Q

Marginal Analysis

A

Analysis that involves comparing marginal benefits and marginal costs

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9
Q

Market

A

A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade

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10
Q

Market Economy

A

An economy in which the decisions of households and firms interacting in markets allocate economic resources

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11
Q

Microeconomics

A

The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices

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12
Q

Mixed Economy

A

An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a specific role in the allocation of resources

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13
Q

Normative Analysis

A

Analysis concerned with what ought to be

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14
Q

Opportunity Cost

A

The highest-valued alternative that must be given up to engage in an activity

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15
Q

Positive Analysis

A

Analysis concerned with what is

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16
Q

Productive Efficiency

A

A situation in which a good or service is produced at the lowest possible cost

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17
Q

Scarcity

A

A situation in which unlimited wants exceed the limited resources available to fulfill those wants

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18
Q

Trade-Off

A

The idea that, because of scarcity, producing more of one good or service means producing less of another good or service

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19
Q

Voluntary Exchange

A

A situation that occurs in markets when both the buyer and the seller of a product are made better off by the transaction

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20
Q

Three Economic Ideas

A
  1. People are rational
  2. People respond to economic incentives
  3. Optimal decisions are made at the margin
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21
Q

People are Rational

A

Economic idea that means that economist assume that consumers and firms use all available information as they act to achieve their goals. They weigh the benefits and the costs and only make a decision if the benefits outweigh the costs

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22
Q

People Respond to Economic Incentives

A

Economic idea that means that people will make decisions based on how costly they will be. Like banks not wanting to pay for a security guard $50,000 and safety glass $10,000-20,000 when usually they only lose about $1200 in a robbery

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23
Q

Optimal Decisions are made at the Margin

A

Economic idea that means that people weigh the marginal benefits with the marginal costs to make the decision that will help them save the most money

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24
Q

Why is SCARCITY central to the study of economics?

A

We must obtain our goals with limited resources

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25
Q

Why does SCARCITY imply that all people and societies face trade-offs?

A

Because you cannot use up all the resources at once so we must choose one or the other

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26
Q

Three Economic Questions That Every Society Must Answer

A
  1. What goods and services will be produced
  2. How will the goods and services be produced
  3. Who will receive the goods and services produced
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27
Q

What goods and services will be produced

A

producers/providers make this decision based on consumers decisions, they they are buying more iPhones than iPads, apple will make more iPhones

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28
Q

How will the goods or services be produced

A

producers/providers make this decision based on what will be most effective for them, if they will make more money by using more machines and actual workers, then they will choose to do that

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29
Q

Who will receive the goods and services produced

A

depending on the type of government, goods are distributed to where they should go based on regulations

30
Q

Ceteris Paribus

A

-All else equal

31
Q

Perfectly Competitive Market

A

-A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products and (3) no barriers to new firms entering the market

32
Q

Demand Schedule

A

-A table that shows the relationship between the price of a product and the quantity of the product demanded

33
Q

Quantity Demanded

A

-the amount of a good or service that a consumer is willing and able to purchase at a given price

34
Q

Demand Curve

A

-A curve that shows the relationship between the price of a product and the quantity of the product demanded

35
Q

Market Demand

A

-The demand by all the consumers of a given good or service

36
Q

Law of Demand

A

-The rule that, holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase and vice versa

37
Q

Substitution Effect

A

-The change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods that are substitutes

38
Q

Income Effect

A

-The change in the quantity demanded of a good that results from the effect of a change in the good’s pice on consumers’ purchasing power

39
Q

Normal Good-

A

A good for which the demand increases as income rises and decreases as income falls

40
Q

Inferior Good

A

-A good for which the demand increases as income falls and decreases as income rises

41
Q

Substitutes

A

Goods and services that can be used for the smae purpose

42
Q

Compliements

A

Goods and services that are used together

43
Q

Demographics

A

the characteristics of a population with respect to age, race, and gender

44
Q

WHICH WAY DOES THE DEMAND CURVE SHIFT?

As income increases..and the good is normal..

A

the curve shift right..because you spend more of your higher income

45
Q

WHICH WAY DOES THE DEMAND CURVE SHIFT?

An increase in income…inferior good…

A

Curve shifts left..because we spend less of our high income on good

46
Q

WHICH WAY DOES THE DEMAND CURVE SHIFT?

An increase in the price of a substitute..

A

right shift…because buy less of substitute and more of this good

47
Q

WHICH WAY DOES THE DEMAND CURVE SHIFT?

increase in price of compelment…

A

left shift..because buy less of complement and less of this good because you need both

48
Q

WHICH WAY DOES THE DEMAND CURVE SHIFT?

increase in the taste of a good…

A

right shift..because willing to buy larger quantity of good at every price

49
Q

WHICH WAY DOES THE DEMAND CURVE SHIFT?

increase in population..

A

right shift..because more people mean more demand

50
Q

WHICH WAY DOES THE DEMAND CURVE SHIFT?

increase in the expected price of the good in the future

A

right shift..because consumers buy more today to avoid higher price in the future

51
Q

Quantity Supplied

A

the amount of a good or service that a firm is willing and able to supply at a given price

52
Q

Supply Schedule

A

A table that shows the relationship between the price of a product and the quantity of the product supplied

53
Q

Supply Curve

A

A curve that shows the relationship between the price of a product and the quantity of the product supplied

54
Q

Law of Supply

A

The rule that, holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied

55
Q

Technological Change

A

A positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs

56
Q

WHICH WAY DOES THE SUPPLY CURVE SHIFT?

increase in the price of an input..

A

Left shift..because the costs of producing rise

57
Q

WHICH WAY DOES THE SUPPLY CURVE SHIFT?

increase in productivity…

A

right shift..because costs of producing the good fall

58
Q

WHICH WAY DOES THE SUPPLY CURVE SHIFT?

increase in the price of a substitute in production..

A

left shift.. because more of the substitute is produced and less of the good is produced

59
Q

WHICH WAY DOES THE SUPPLY CURVE SHIFT?

increase in number of firms in the market

A

right shift..because additional firms increase quantity at every price

60
Q

WHICH WAY DOES THE SUPPLY CURVE SHIFT?

increase in the expected future price of the product

A

left shift..because less of the good will be offered for sale today to take advantage of the higher price in the future

61
Q

Surplus

A

Quantity supplied is greater than quantity demanded

62
Q

Shortage

A

Quantity supplied is less than quantity demanded

63
Q

Price Celing

A

a legally determined maximum price that sellers may charge

64
Q

Price floor

A

a legally determined minimum price that sellers may receive

65
Q

Consumer surplus

A

the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays

66
Q

Marginal Benefit

A

the additional benefit to a customer from consuming one more unit of a good or service

67
Q

Marginal cost

A

the additional cost of a firm for producing one more unit of a good or service

68
Q

producer surplus

A

the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives

69
Q

economic surplus

A

the sum of consumer surplus and producer surplus

70
Q

economic efficiency

A

a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum

71
Q

tax incidence

A

the actual division of the burden of a tax between buyers and sellers in a market

ECON 142 (3 decks)

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