Micro economics 111 Flashcards
economics is the study of?
How people use limited resources to satisfy there unlimited needs
What is Opportunity Cost?
The BEST alternative possibility
What are the factors of production?
Land, Labour, Capital, Enterprise
What is land and what does it generate?
Land is natural resources, it generates rent.
What is Labour and what does it generate?
Labour is the mental and physical effort by humans to produce goods and services. Labour generates a wage
What is Capital and what does it generate?
Capital is the human made resources (tools, equipment, machinery etc.) used to produce goods and services. It generates interest.
What is Enterprise and what does it generate?
Enterprise is the person or people who take the risk or innovate on an idea. The generate profits.
What is Productive efficiency?
Productive efficiency is the production of an output at the lowest possible cost
What is allocative efficiency?
The production of products that best suits consumers demand ie. producing cheap large screen tvs that can only play black and white images would have a low allocative efficiency (because aint nobody got time for that)
What are the 4 Cs when referring to the types of Economies?
Custom, Co-operation, Command and competition
Who is responsible for the surplus created by government created price floors?
The gov’ment. Obviously.
What is an example of an inelastic product?
Cigarettes
What does elastic demand mean?
When demand is quite responsive to the change in price. (has a elasticity coefficient greater than 1)
How do you determine the elasticity coefficient?
(change in Qd/average Qd)/(change in P/Average P)
What does a price ceiling produce?
Shortage
What does a price floor produce?
Surplus
When demand goes up what does that do to the price and quantity?
The price and quantity go up
When the Supply goes up what does that do to the price and quantity?
The price goes down and the quantity goes up
What are the 5 shift factors in the demand curve?
- Income (specifically real income)
- Taste and preference
- Price of related goods (Substitutes and complimentary)
- Expectations (futures)
- Population (market size changes)
What are the 6 shift factors in the supply curve?
- Price of resources (wages, inputs costs etc)
- Business Tax
- Technology improvement
- Price of substitutes in production (eg beef prices rise so farmers move away from milking cows and into butchering them which decreases the supply of mulk
- Expectations (futures)
- Number of suppliers
What is the law of demand?
Price and quantity are inversely related
What are the three determinants of price elasticity?
availability of substitutes
percentage of household income spent on commodity
The amount of time elapsed since the price change
