Intro Flashcards
When allocating scarce recourse what questions does the society have to answer?
Which goods and services should be produced?
How should the good be produced?
Who gets the goods and services?
Opportunity cost
The cost of any activity/ good in terms of the best best alternative that has been forgone
What makes a good model?
- it is clear
- it predicts accurately
- it improves communication
- it is useful
Positive statement
Testable hypothesis based on facts
Nominative statement
Value judgment, they are subjective
What does the demand curve depend on?
Population Income Related goods Advertisement Trends Expectations Seasons
What does the supply curve depend on?
Productivity Indirect taxes Number of firms Technology Subsidies Weather Cost of production
Exogenous
Having an external cause or origin
Endogenous
Having an internal cause or origin
Comparative statics analysis
The comparison of two different economic outcomes
When is the basic supply and demand model appropriate
When markets are perfectly competitive
