Micro Flashcards

1
Q

microeconomics

A

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

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2
Q

what is scarcity?

A

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

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3
Q

opportunity cost

A

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

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4
Q

what is a model

A

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

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5
Q

demand curve

A

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

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6
Q

supply curve

A

how much firms are willing to supply given the price

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7
Q

market equilibrium

A

where supply and demand meet

where consumers and producers are happy to transact

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8
Q

positive analysis

A

the study of the way things are

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9
Q

normative analysis

A

the study of the way things should be

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10
Q

3 classes of failures in economics

A

market
equity
behavioral

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11
Q

command model

A

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

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12
Q

Adam Smith’s Invisible Hand view

A

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

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13
Q

demand

A

how do consumers decide what they want given their resources

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14
Q

utility maximization

A

getting the most for what i have

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15
Q

supply

A

firms have to decide what to produce given their resources

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16
Q

shortage

A

a limitation of a particular good at a particular price

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17
Q

3 economic questions

A

what to produce
how to produce
for whom to produce

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18
Q

simplified versions of reality used to analyze real world economic situations

A

economic model

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19
Q

rational

A

using all available information to achieve your goals

customers only buy when the benefits outweigh the costs

20
Q

what do incentives do

A

change the actions that people take

21
Q

marginal

A

additional benefit or cost from making a decision

22
Q

marginal analysis

A

comparing marginal cost with marginal benefit

23
Q

trade-off

A

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

24
Q

centrally planned economy

A

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

25
Market economy
when decisions of household and firms determine what is produced and who receives the goods and services
26
market
a group of buyers and sellers of goods and services and the arrangement they come together to trade
27
mixed economies
most economic decisions come from the results of buyer and seller interactions, but the govt still has a significant role over who gets resources
28
productive efficiency
where goods and services are produced at the lowest cost
29
allocative efficiency
production is consistent with consumer preferences, the marginal benefit is equal to marginal cost
30
voluntary exchange
where the transaction makes both the buyer and seller better off
31
equitable
the fair distribution of economic benefits
32
steps to build an economic model
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
33
testability
good models generate testable predictions which can be verified or disproved using data
34
economic variables
something measurable that can have different values, like the income of people in the same profession
35
positive analysis
study of what is
36
normative analysis
study of what ought to be
37
microeconomics
study of how households and firms make choices and how they interact in markets, how the govt attempts to affect our choices
38
technology
the processes a firm uses for turning inputs to outputs of goods and services
39
capital
manufactured goods that a re use to produce other goods and services
40
investment
acquisition and holding of potentially income generating forms of wealth
41
demand
strength of one or more consumers willingness to purchase goods in a range of price
42
positive relationship with variables
as one increases, so does the other
43
reverse causality
variables are associated but not in the way you would think
44
when are relationships linear?
when their relationships are represented by a sttraight line
45
%change formula
(value in 2nd period) - (value 1st period) / value 1st period