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Micro Econ > first half of semester > Flashcards

first half of semester Flashcards

1
Q

Positive Economics

A

A leads to B. Cause and effect. Ex: in a system where citizens keep the money they earn, the society is more prosperous

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2
Q

Normative Economics

A

Has unintended consequences. What should happen. Ex: citizens should be able to keep all the money they make

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3
Q

Praxeology

A

The study of human actions. We choose what is best for us. we value more than what we value less

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4
Q

Catallactics

A

the choices that we make in the market place depending on what they make/sell

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5
Q

Cui bono?

A

who benefits? for whose good is it?

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6
Q

Ceteris paribus

A

if you isolate this then A will lead to B; nothing else changes

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7
Q

Value is…

A

mutable, subjective, and ordinal

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8
Q

Economic Freedom means..

A

safe property rights. we can’t be free without property rights

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9
Q

Personal Utility

A

something that is useful to us

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10
Q

How do we determine value?

A
  1. Utility

2. Scarcity

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11
Q

Marginal Utility

A

How much one more unit is worth

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12
Q

Who was Carl Menger?

A

he came up with subjective value

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13
Q

Economics

A

choosing what you value more over what you value less

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14
Q

what are 2 ways a society decides what to produce?

A
  1. the government decides (in a socialist system)

2. consumers (free-market)

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15
Q

Consumers goods

A

goods consumers buy such as food, clothes, cars, cell phones, etc.

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16
Q

Producer goods

A

what producers buy based off of what the consumer buys

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17
Q

Chain of command

A

consumers tell the producers what they want

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18
Q

marginal buyers

A

at the margin is where these buyers’ behaviors change. buyers can come into the market as a result of a price drop or drop out of the market as a result of prices rising

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19
Q

role of prices:

A
  1. can attract resources to a certain market
  2. limits how much you’ll buy
  3. encourages people to conserve scarce resources
  4. control the allocation of resources
  5. coordinate economic activity
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20
Q

Opportunity costs

A

spending money one way so that you can’t spend that money another way. What you give up to buy something else

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21
Q

Intrinsic value

A

how much value we give to an object

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22
Q

prices are determined by…

A

SUPPLY AND DEMAND

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23
Q

What is it called when the price for a product is fixed to keep away from the market clearing price?

A

a government price control

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24
Q

Market clearing price

A

where the supply and demand for a product is even

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25
Q

more supply than demand means a…

A

surplus

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26
Q

cure for a surplus?

A

let the prices fall to the marketing clearing price

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27
Q

what do we call a price control that keeps the price from going lower?

A

A price flooring

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28
Q

what do we call a price control that keeps the price from going higher?

A

A price ceiling

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29
Q

Shortage

A

not enough for everyone because of price

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30
Q

Scarcity

A

physical reality. The stuff doesn’t exist. all used up

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31
Q

caused by government intervention blocking the marketing from finding the market clearing price

A

Price Phenomenon

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32
Q

Above the market price?

A

more supply than demand

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33
Q

Below market price?

A

more demand than supply

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34
Q

Rent Control

A

putting a ceiling over the price of rent so that the price cannot go any higher

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35
Q

Elastic Demand

A

how sensitive or responsive the demand is for a product when there is a change of price on the product

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36
Q

Inelastic Demand

A

response to changes in price is very small

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37
Q

Government control causes….

A

shortages

38
Q

Price gouging

A

when a company is supposedly setting high prices

39
Q

Predatory pricing

A

when companies set their prices very low

40
Q

Does it make sense for a merchant to sell a product for high prices?

A

yes. because then someone who really needs it can get it without the fear of that product being sold out

41
Q

who does predatory pricing bother?

A

the competitor because their company might not be able to set prices that low

42
Q

Competition is the great protector of the…

A

consumer

43
Q

Buyers market

A

in favor of the buyers. more sellers than buyers so there are low prices

44
Q

Sellers market

A

more buyers than sellers so prices are higher

45
Q

Markets constantly need…

A

adjustment (gradually; over time)

46
Q

A company’s success depends on the…

A

consumer

47
Q

when revenue is greater than exp

A

gain

48
Q

when losses are greater than revenues

A

loss; either need to fix this or get out

49
Q

Private property (free market)

A

people can build what they want

50
Q

Private property (socialist)

A

planned economy so they can’t build what they want; no choice

51
Q

Price (free market)

A

vital in free market because they coordinate function. communicate between consumers and sellers what they value most

52
Q

Price (socialist)

A

prices are dictated. don’t reflect what consumers want so there are constant surpluses and shortages

53
Q

Profit (free market)

A

new wealth that adds to the wealth of the society. people getting rich are providing superior customer value

54
Q

Profit (socialist)

A

there is not profit being made because whatever is made is spread evenly to everyone

55
Q

What are the 3 P’s

A
  1. Private Property
  2. Price
  3. Profit
56
Q

A healthy economy…

A

destroys jobs and unprofitable businesses because they are detracting from other profitable businesses that are providing customer service better

57
Q

A&P, Montgomery Ward, and Kodak are examples of…

A

companies that went out of business because they failed to adapt to the customers changing wants and needs

58
Q

Division of Labor

A

specialization; putting someone in charge that knows how to do the job and get it done well as opposed to someone who doesn’t know the business and can’t do the job

59
Q

Consumer sovereignty

A

consumers don’t dictate the prices because prices would be too low for suppliers, but they do help set the prices based on how much they pay for a product

60
Q

Law of diminishing returns

A

states that in a production process, as one input variable increased, there will be a point at which the marginal per unit output will start to decrease holding all other factors constant

61
Q

Economies of scale

A

sometimes advantages to a company getting large.

62
Q

What are the costs of a company

A
  1. Fixed costs

2. Variable costs

63
Q

Fixed costs

A

not changing. set prices that have already been paid

64
Q

Variable costs

A

things that happen that aren’t expected or planned for

65
Q

Learning Curve

A

you learn more as you practice. so it will take longer the first few times to make a product than it will later on

66
Q

Diseconomies of scale

A

having too many workers that slow down production

67
Q

The Factors of Production

A
  1. Land (raw materials)
  2. Labor (workers)
  3. Capital (Equipment to produce with)
  4. Mind (an entrepreneur; a vision)
68
Q

3 value-creating forms of income

A
  1. Labor–work for it!
  2. Investment–savings
  3. Entrepreneurial–succeeds in creating value for customers
69
Q

fixed cost per unit =

A

total fixed costs divided by number of units

70
Q

More output =

A

lower labor costs

71
Q

Productivity

A

doing your work faster and better

72
Q

The iron law of wages

A

more workers=lower wages. workers were doomed to low wages that just keep them alive because there were so many poor people that needed jobs

73
Q

Discrimination

A

prejudice in the 40s because people wouldn’t be hired because of race or gender

74
Q

Rent

A

special meaning in economics. Individual business revenue/income attributable to special governmental rules

75
Q

Unions

A

organizations meant to better the work conditions for employees. weren’t used to be allowed to join a union, now workers are compelled to. We should be able to choose if we want to join a union or not

76
Q

Who was John L. Lewis?

A

worked in the coal mining industry. was able to raise the wages for workers but wages were raised so high that people had to be laid off because the employers couldn’t afford it. High wages led to high prices for coal so people stopped buying coal and started buying oil

77
Q

Wages are determined by…

A

the supply and demand of workers

78
Q

Political rent

A

income to a business or individual that is the result of political intervention–not economic intervention

79
Q

What does capital do?

A

it improves what the labor can do which means they are more productive

80
Q

Capital per Capita

A

shows which societies are the wealthiest. More productive because of how much capital they have

81
Q

3 components of interest rates:

A
  1. Original rate (time preference)–discount the future
  2. Risk Premium (factor)– the riskier the venture, the higher rate of interest on that loan
  3. Inflation Premium–increase in prices over a period of time
82
Q

Definition of money:

A
  1. medium of exchange
  2. unit of account (to measure profit/loss)
  3. store of value (lasing store of purchasing power)
  4. that which makes indirect exchange possible
  5. (ludwig Von Mises’s definition) the most marketable commodity
83
Q

Money needs to be

A
  1. durable
  2. portable
  3. divisible
  4. valuable
  5. useful in making products
84
Q

how do societies become wealthy?

A
  1. well-developed division of labor
  2. Productivity of labor
  3. price system that communicates prices between buyers and sellers
  4. reliable money
85
Q

Gresham’s law

A

bad money drives out good money because one form of money is overvalued, people will use a different form of money to make purchases

86
Q

Legal tender laws

A

the force of law compels a person to accept money that isn’t worth as much as the product. causes negative sum transactions

87
Q

Hyperinflation

A

high inflation

88
Q

Bimetallic

A

gold is worth more not as money but at metal

89
Q

deflation

A

when prices fall

90
Q

Fractional reserve banking

A

keeping 100 dollars of what people put into the bank

91
Q

Federal reserve

A

depreciating our currency when it was supposed to stabilize our money

Micro Econ (1 decks)

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