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microeconomics > microeconomics > Flashcards

microeconomics Flashcards

1
Q

Microeconomics is concerned with…

A

decision making by individual customers, workers, households, and business firms

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2
Q

economizing problem

A

people need to make choice because economic wants exceed economic means

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3
Q

Economics is concerned with

A

how individuals, institutions, and society make the optimal choices under conditions of scarcity

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4
Q

Economic systems differ…

A

as to (1) who own the factors of production and (2) the method used to motivate, coordinate, and direct economic activity.

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5
Q

Economic System are

A

a particular set of institutional arrangements and a coordinating mechanism

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6
Q

An economy is producing on its production possibilities curve when

A

they are utilizing the different combinations of goods and services that that can be produced with full employment

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7
Q

Demand

A

a schedule or curve that shows the various amount of a product that consumers are willing and able to purchase at a series of possible prices during a specified period of time

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8
Q

When the price of a product increases (demand)

A

quantity demanded falls, there is negative relationship with price and quantity demanded. this is the law of demand

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9
Q

Normal good

A

products whose demand varies directly with the money income,

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10
Q

When the price of a product increase (supply)

A

the higher the price, the more producers will supply

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11
Q

Changes in demand occur in our occur demand curved is shifted which can happen because of a change in determinants of demand, what are these deteminants

A

tastes, number of buyers, income, prices of related goods, consumer expectations

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12
Q

Market Failure

A

Market Demand curve must reflect the full willingness to pay of every person receiving benefits from the products being sold in the market.
Market supply curve must reflect all of the costs of production, including those that may fall onto persons not directly involved with the production of the product being sold.

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13
Q

total surplus

A

measures the net benefits accruing to society from the conversion of scarce resource inputs into various forms of output.

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14
Q

Consumer surplus (where is it on the graph, how is it defined, how is it derived)

A

it the triangle above the equilibrium price. the share of the total surplus that is received by a consumer or consumers in a market. it is defined by the max price a consumer is willing to pay and the actual price they to pay

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15
Q

Producer surplus

A

is the triangle below the equilibrium price

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16
Q

Productive efficiency

A

achieved because competition forces producers to use all tech and resources available.

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17
Q

Allocative efficiency

A

the correct quantities of a good are produced relative it other goods and services

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18
Q

efficiency losses analyzes

A

the case of underproduction by considering what happens if out put falls from the efficient level to a smaller amount. Also known as deadweight loss, its the triangle

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19
Q

Negative externalities

A

when producer or suppliers impose costs on third parties who are not directly involved in a market transaction , it includes pollution

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20
Q

Positive externalities

A

people who are not directly related to the market transaction recieve benefit.

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21
Q

Government intervention

A

direct control, subsidies and govt provision, pigovian taxes

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22
Q

Direct Control

A

force the firms to incur the actual costs of their negative externalizes, such as pollution.

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23
Q

Pigovian taxes

A

levy taxes or charges on the related good, tax items that cause a lot of damage.

24
Q

subsidies

A

support either buyers, producers, or a provision that provides for all the poeple like a smallpox vaccine

25
Q

optimal reduction of an externality

A

is when marginal benefit is equal to marginal costs, which is why there still be trash yall lol

26
Q

government failure

A

economically inefficient outcomes that cause by the shortcomings in the public sector.

27
Q

asymmetric info

A

when one party in a transaction possesses substantially more info than the other party gasoline is an example

28
Q

Demand side market failures

A

arise when demand curves under report how much consumers are willing and able to pay for a product. Demand curve shifts left and equilibrium output is below social optimum, related to positive xternalities

29
Q

Principal agent problems -

A

problem that arise when tasks are delegated to a group but the principal and agents ideas do not align.

30
Q

Special Interest effect

A

when a small group can act as lobbiest over a larger political group.

31
Q

rent-seeking behavior

A

appeals for special benefits at someone else’s expense is called rent seeking

32
Q

Regulatory capture

A

the people that are supposed to regulate the industry are usually involved in the industry

33
Q

Deregulation

A

is to intentionally remove most or all regulation of an industry

34
Q

Elasticity of demand is defined as

A

% change in price of product X

35
Q

how to find percent change

A

P2 - P1
_
p1

36
Q

midpoint formula

A

(change in quantity/ [sum quantities/2]) / (change in price/ [sum of prices/2])

37
Q

demand is elastic when E(d) is

A

greater than 1

38
Q

demand is inelastic when E(d) is

A

less than 1

39
Q

demand is unit elastic when E(d) is

A

equal 1 so the demand line is horizontal

40
Q

Perfectly inelastic

A

is when E(d) is zero and the demand line is vertical

41
Q

what is total revenue and how is it calculated?

A

total ammoint a seller receives from the sale of a product in a time period.
multiply price by quantity sold

42
Q

If Demand is elastic, a decrease in price will…

A

increase total revenue

43
Q

If demand is inelastic, a price decrease

A

reduces total revenue

44
Q

the upper left hand of the demand curve is more or less elastic

A

it is elastic

45
Q

determinants of price elasticity of demand

A

substitutability, proportion of income, luxuries versus necessitites, time

46
Q

whats are excise taxes

A

a tax levied on the production of a specific product or on the quantity of the product purchased

47
Q

Cross Elasticity of demand measures the sensitivity of consumer purchases by

A

% change in quantity demanded or product X/% change in price of a product Y

48
Q

the cross elasticity formula shows that goods are substitutes when…

A

cross elasticity of a demand is positive

49
Q

the cross elasticity formula shows that goods are complementary when…

A

cross elasticity of a demand is negative

50
Q

Income elasticity of demand formula

A

% change in quantity demanded/% change in income

51
Q

Inferior Goods have (negative/positive) income-elasticity coefficient

A

negative

52
Q

When Marginal utility is 0

A

total utility is neither rising nor falling

53
Q

The Utility maximizing rule is when… (and formula)

A

(MU of product A/Price of A) = (MU of product B/ Price of B)
allocate their income so that the last dollar spent on product A, the last on product B, and so forth, yield equal amounts of marginal utility

54
Q

Neoclassical vs Behavioral economics

A

are accurate and deal with risk factors and uncertainty,

Behavioral Economics attempts to make predication about human behavior by also using psychology and biology

55
Q

Cognitive biases

A

misconceptions or misunderstandings that cause systemic errors

microeconomics (2 decks)

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