Micro Exam Flashcards
Analysis concerned with what ought to be
Normative Analysis
(If i buy this I can’t buy that)
Opportunity Cost
(Analysis concerned with what is)
Positive Analysis
(is simplified version of reality used to analyze real-world situations)
Economic Model
(Something Measurable that can have different values)
Economic Variable
(The study of the choice people make to attain their goals, given their scarce resources)
Economics
(unlimited wants exceed the limited resources available)
Scarcity
(The fair distribution of economic benefits)
Equity
(Analysis that involves comparing marginal benefits and marginal costs)
Marginal Analysis
(is the study of how households and firms make choices)
Microeconomics
(is the study of the economy as a whole)
Macroeconomics
Rations consumers and firms use all available information as they act to achieve their goals
People are rational
Economists emphasize that individuals and firms consistently respond to economic incentives
People Respond to Economic Incentives
Economists use the word marginal to mean an extra or additional benefit or cost from making a decision
Optimal decisions are made at the margin
(The ability of an individual, firm, country to produce more of a good or service than competitors, using the same amount of resources)
Absolute Advantage
(The ability of an individual, firm, or a country to produce a good or service at a lower opportunity cost than competitors)
Comparative Advantage
(A market with few government restrictions on how a good or service can be produced or sold or on how a factor of production can be employed)
Free Market
(A group of buyers and sellers of a good or service and institution or arrangement by which they come together to trade)
Market
(Labor, capital, natural resources, and other inputs used to make goods and services)
Factors of Production
(a curve that shows the relationship between the price of a product and the quantity of the product demanded)
Demand Curve
(A market that meets the conditions of having 1 many buyers and sellers, 2 all firms selling identical products and 3 no barriers to new firms entering the market)
Perfectly Competitive Market
(The change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power)
Income Effect
(holding everything else constant, when the price of a product falls the quantity of demanded of the produce will increase)
Law of Demand
(holding everything else constant, increases in price cause increases in the quantity supplied, and decreases price case decreases in quantity supplied)
Law of Supply
(The change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods)
Substitution effect
(A situation in which the quantity supplied is greater than the quantity demanded)
Surplus
(A measure of how much one economic variable responds to changes in another economic variable)
Elasticity
(The responsiveness of the quantity supplied to a change in price, measured by dividing the percentage change in quantity supplied of a product by the percentage change in the products price)
Price elasticity of supply
(The total amount of funds a seller receives from selling of a good or service, calculated by multiplying price per unit by the number of units sold)
Total Revenue
percentage change in quantity/percentage change in price
Price elasticity of demand
(economic decisions result from the interaction of
buyers and sellers in markets but in which the
government plays a significant role in the
allocation of resources)
Mixed Economy
A state of the economy in
which production is in accordance with
consumer preferences
Allocative Efficiency
