Microeconomics Set 1 (1-7) Flashcards
thorough objective content points to be by-hearted
Difference between positive and normative statements
Positive statements are factual and based on empirical evidence. Normative statements are judgements or opinions.
What is real data and nominal data
real data are values adjusted for inflation, nominal data isn’t.
What is the economic problem?
Scarcity of resources to satisfy unlimited wants.
What is opportunity cost?
the forgone value/benefit of the next best alternative.
Name the economic FoP and their rewards
Land - Rent
Labour - Wages
Capital - Interest
Enterprise - Profit
Define Productive efficiency for a PPC diagram
The point of output where you are unable to produce more of one good without producing less of another. All resources are assumed to be fully utilized.
Assumptions of “maximum possible production”
Fixed quantity and quality
Fixed efficiency
Fixed technology
What is the formula to Marginal Opportunity Cost
Sacrifice/Gain (between units)
What is allocative efficiency?
A combination of goods and services that reflects/satisfies what’s best for society and its welfare. MC=MR
How would a change in demand shift the PPC?
it wouldn’t
What is an economic system?
The combination of various agencies and entities that provide economic structure, define social community, and resolve the basic economic problem.
What are the agents of the economic system?
Individuals, Groups, Government
What is the market mechanism.
The free market: where the prices and quantity are determined by the market forces of demand and supply.
What are the types of economic systems
Free market
Planned Economy
Mixed
What are the assumptions of any economic theory (consumers)
That people are rational: always maximize self-interest, and they assess costs and benefits when making alternative choices (maximizing total utility)
Assumption of a firm
That they are profit maximizing
Assumption of a worker
Maximize their wages or job security. Work the least amount of hours for the most amount of pay possible
Marginal utility
the additional satisfaction of consuming one more unit of a good
Marginal benefit
(measured in dollar value equivalent). The number of dollars you are willing to pay for one more unit of a good.
Diminishing theory (falling marginal utility)
For every extra unit consumed, utility falls
What is disutility
Discomfort. Queues, crowds, spam ads, etc.
