Micro

Question 1

microeconomics

Answer 1

the study of how individuals and firms make decisions in a world of scarcity

Question 2

what is scarcity?

Answer 2

a series of constrained optimization exercises - making themselves as well off as possible given constraints

Question 3

opportunity cost

Answer 3

every action or inaction has a cost of the alternatives you could have done instead

Question 4

what is a model

Answer 4

a description of 2 or more economic (any) variables

captures phenomena of the real world as best as possible, in the most possible ways in order to be taught later

Question 5

demand curve

Answer 5

represents the price of a good and how much people want it, assumed downward slope

Question 6

supply curve

Answer 6

how much firms are willing to supply given the price

Question 7

market equilibrium

Answer 7

where supply and demand meet

where consumers and producers are happy to transact

Question 8

positive analysis

Answer 8

the study of the way things are

Question 9

normative analysis

Answer 9

the study of the way things should be

Question 10

3 classes of failures in economics

Answer 10

market
equity
behavioral

Question 11

command model

Answer 11

the govt decides how much of what is made and how to distribute it, rather than the market

Question 12

Adam Smith’s Invisible Hand view

Answer 12

consumers and firms through their own self interest, will do what is best for the economy
can lead to unfair outcomes

Question 13

demand

Answer 13

how do consumers decide what they want given their resources

Question 14

utility maximization

Answer 14

getting the most for what i have

Question 15

supply

Answer 15

firms have to decide what to produce given their resources

Question 16

shortage

Answer 16

a limitation of a particular good at a particular price

Question 17

3 economic questions

Answer 17

what to produce
how to produce
for whom to produce

Question 18

simplified versions of reality used to analyze real world economic situations

Answer 18

economic model

Question 19

rational

Answer 19

using all available information to achieve your goals

customers only buy when the benefits outweigh the costs

Question 20

what do incentives do

Answer 20

change the actions that people take

Question 21

marginal

Answer 21

additional benefit or cost from making a decision

Question 22

marginal analysis

Answer 22

comparing marginal cost with marginal benefit

Question 23

trade-off

Answer 23

increasing production/supply/amount of one thing in turn for a reduction of another

Question 24

centrally planned economy

Answer 24

the govt decides how resources are allocated and who receives goods and services

Question 25

Market economy

Answer 25

when decisions of household and firms determine what is produced and who receives the goods and services

Question 26

market

Answer 26

a group of buyers and sellers of goods and services and the arrangement they come together to trade

Question 27

mixed economies

Answer 27

most economic decisions come from the results of buyer and seller interactions, but the govt still has a significant role over who gets resources

Question 28

productive efficiency

Answer 28

where goods and services are produced at the lowest cost

Question 29

allocative efficiency

Answer 29

production is consistent with consumer preferences, the marginal benefit is equal to marginal cost

Question 30

voluntary exchange

Answer 30

where the transaction makes both the buyer and seller better off

Question 31

equitable

Answer 31

the fair distribution of economic benefits

Question 32

steps to build an economic model

Answer 32

decide on model assumptions
formulate hypothesis
use economic data to test hypothesis
revise the model of it fails to explain data
retain model to help answer economic questions

Question 33

testability

Answer 33

good models generate testable predictions which can be verified or disproved using data

Question 34

economic variables

Answer 34

something measurable that can have different values, like the income of people in the same profession

Question 35

positive analysis

Answer 35

study of what is

Question 36

normative analysis

Answer 36

study of what ought to be

Question 37

microeconomics

Answer 37

study of how households and firms make choices and how they interact in markets, how the govt attempts to affect our choices

Question 38

technology

Answer 38

the processes a firm uses for turning inputs to outputs of goods and services

Question 39

capital

Answer 39

manufactured goods that a re use to produce other goods and services

Question 40

investment

Answer 40

acquisition and holding of potentially income generating forms of wealth

Question 41

demand

Answer 41

strength of one or more consumers willingness to purchase goods in a range of price

Question 42

positive relationship with variables

Answer 42

as one increases, so does the other

Question 43

reverse causality

Answer 43

variables are associated but not in the way you would think

Question 44

when are relationships linear?

Answer 44

when their relationships are represented by a sttraight line

Question 45

%change formula

Answer 45

(value in 2nd period) - (value 1st period) / value 1st period