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Mid Term 2 Flashcards

1
Q

consumer surplus

A

between the demand curve and the market price

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2
Q

producer surplus

A

willing to supply if price is greater than the opportunity cost. is the area above the supply line but below the market price

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3
Q

total surplus

A

CS+PS value to buyers minus cost to sellers. an allocation that maximizes TS is said to be efficient

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4
Q

benevolent Social planner

A

all powerful and seeks to maximize economic well being of everyone in society may also care about equity but efficiency first

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5
Q

Market Equilibrium

A

when supply is equal to demand. market allocates the supply of goods to those who value them the most and allocates demand of goods to sellers with lowest costs

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6
Q

BSP cannot…

A

increase well being by reallocation among buyers or sellers

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7
Q

Free market

A

produces quantity of goods that maximizes TS, prices are determined by unrestricted competition between private companies

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8
Q

Chapter 7 summary

A

Forces of supply and demand allocate resources efficiently, buyers and sellers only care about the outcome, market outcome maximizes TS, markets are competitive no market power, no externalities outcomes matter only to market participants, use welfare tools to look at effect of government policies

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9
Q

Tax revenue

A

T x Q which is the rectangle in between supply and demand curve

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10
Q

Welfare

A

the study of how the allocation of resources affects economic wellbeing

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11
Q

dead weight loss

A

area beside tax in between supply and demand curves, lost from total surplus

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12
Q

dead weight loss

A

area beside tax in between supply and demand curves, lost from total surplus. result of market distortion. market shrinks

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13
Q

Price elasticities

A

the more elastic the more buyers and sellers exit

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14
Q

Laffer curve

A

shows most effective way to explain where more TQ could be gained by raising or lowering the tax

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15
Q

world price

A

the price of a good that prevails in the world market for that good

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16
Q

tariff

A

a tax on goods produced abroad and sold domestically

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17
Q

benefits of international trade

A

variety of goods, lower cost through economies of scale
increased competition
enhanced flow of ideas

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18
Q

Arguments for restricting trade

A 
jobs
national security
infant industry
unfair competition
protection as a bargaining chip
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19
Q

externalities

A

the uncompensated impact of one person’s actions on the well being of a bystander

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20
Q

Social optimum

A

In the presence of a negative externality, the social cost of the good exceeds the private cost. the optimal quantity therefore drops

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21
Q

internalizing the externality

A

alter incentives so that people take account of the external effects of their actions

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22
Q

corrective taxes

A

taxes enacted to correct the effects of negative externalities

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23
Q

corrective taxes vs permits

A

taxes set price, permits set quantity

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24
Q

subsidies

A

how the government balances positive externalities

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25
caose theorem
if private parties can bargain without the cost over the allocation of resources, they can solve the problem of externalities on their own
26
transaction costs
the costs that parties incur in the process of agreeing to and following through on a bargain
27
excludability
the property of a good whereby a person can be prevented from using it
28
rival in consumption
where one person's use of a good diminishes the other peoples use
29
private goods
goods that are excludable and rival (ice cream)
30
public goods
not rival and not excludable (fire alarm)
31
common resource
rival but not excludable (fish in the ocean)
32
club goods
excludable but not rival (Cable tv)
33
free rider
a person who receives benefit of a good but avoids paying for it
34
cost benefit analysis
compares the costs and benefits to society of providing a public good
35
tragedy of the commons
why common resources get used more than is desirable from the standpoint of society as a whole (over fishing)
36
budget deficit
an excess of government spending over government receipts
37
budget surplus
if revenue exceeds spending
38
average tax rate
total taxespaid over total income
39
marginal tax rate
the extra taxes on an additional dollar of income
40
lump sum tax
same for everyone
41
benefits principle
taxes should fall to the amount a person can burden
42
vertical equity
tax payers with greater ability to pay should pay larger amounts
43
horizontal equity
taxpayers with similar ability to pay should pay the same amount
44
proportional tax
everyone pays the same tax
45
regressive tax
a tax where higher income tax payers pay a smaller percentage of their income
46
progressive tax
a tax where high income taxpayers pay a higher percentage of their income than low income families
47
Efficiency
The property of society getting the most it can from the the scarce resources
48
Equity
The property of distributing economic prosperity fairly among members of society
49
Opportunity cost
What you give up | To get something
50
Rational people
Systematic and purposefully do the best they can to achieve their objective
51
Marginal changes
Small changes to a plan of action
52
People respond to incentives
Induced a person to act
53
Market economy
Allocated resources through the decentralized deductions of many firms and households as they interact in markets for goods and services
54
Property rights
Ability to own a scarce resource
55
Market failure
Market left on its own fails to | Allocate resources
56
Externality
Impact on wellbeing of a bystander
57
Market power
Single economic actor to have substantial sway on market
58
Circular flow diagram
A visual of an economy that shows how dollars flow through markets among households and firms see page 22
59
Production Possibilities frontier
Shows combo of output an economy can possibly produce with given goods and services available
60
Micro
How households and firms make decisions
61
Positive statements
Attempt to describe world as is
62
Normative statements
Attempt to prescribe how the world should be
63
Absolute advantage
The comparison among producers of a good according to their productivity (smaller quantity of input is AA)
64
Comparative advantage
Comparison among producers of goods according to their opportunity cost (whoever gives up less of another good to produce a good has CA)
65
Market
Group of buyers and sellers of a particular good or service
66
Competitive market
Many buyers and many sellers so that each has a negligible impact on market price
67
Perfectly competitive market 2 parts
All goods are same and everyone is price taker
68
Quantity demanded
Amount of goods buyers are willing and able to purchase
69
Law of demand
Other things equal, the quantity demanded of a good falls when the price rises
70
Demand schedule/curve
Shows relationship between price and quantity demanded of a good
71
Normal good
An increase in income leads to an increase in demand
72
Inferior good
An increase in income leads to a decrease in demand
73
Substitute goods
An increase in the price of one leads to an increase in the demand for the other
74
Complements
Increase in price of one leads to decrease in demand for the other
75
Law of supply
The quantity supplied of a good roses when the price of a good rises
76
Equilibrium
Price supplied = quantity demanded
77
Surplus and shortage
Don’t fuck this up
78
Law of supply and demand
Price of any good adjusts to bring the quantity supplied and the quantity demanded into balance
79
Elasticity
The measure of responsiveness of quantity supplied or demanded to one of its determinants
80
A measure of how much a quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in Qd divided by the percentage change in price
Price Elasticity if demand
81
Price elasticity demand
%change in Qd / %change in Proce
82
Total revenue
Amount paid buy buyers and received by sellers of a good, computed as the Price x Qsold
83
Elastic if I inelastic if
If greater than one. Unelastic, unit of it equals one
84
Time horizon definition of market necessities vs luxuries available close subs
Pg 92
85
Tax incidence
How tax burden is shared among the market
86
Tax on buyers and sellers comp
Buyers drops DCurve sellers raises SCurve
87
Tax burden with elasticity
Elastic supply on buyers | Elastic demand on sellers
88
Total cost
Market value of inputs used by a firm
89
Total revenue
Output of sales
90
Profit is
TR - TC
91
Explicit costs
Input costs that require outlay of money by firm
92
Implicit costs
Don’t require outlay of money
93
Econ profit
Is profit including losses from implicit and explicit costs
94
ATC MC
TC/Q | ChangeTC / change Q
95
Long term short term economies and ATC
Short ATC falls as output increases (specialization) Long ATC rises as output rises (to stretched out, not productive) Always U shaped Long term firms can pick but not short
96
Sunk cost
Already been committed and can’t be recovered
97
Exit market short and long term
MC
98
Monopoly
Sole seller with no close substitutes
99
Natural monopoly
When a firm can supply an entire market at lower cost than two or more could. (Distribution of water)
100
Monopoly profit
P-ATC x Q
101
Price discrimination
Selling same good for different price to different buyers
102
Monopolistic competition
Many firms selling similar but not identical products
103
Oligopoly
Few sellers offer similar or same product
104
Oligopoly Nash equilibrium and prisoners dilemma shows what theory
Game theory(how people act in strategic situations)
105
Capital
Equipment and structures used to produce goods and services
106
Human capital
Accumulation of investments in people
107
Compensating differential
Shit jobs more money
108
Efficiency wages
Pay above equilibrium for added results
109
Unions
Workers make 10-20 percent more
110
In kind transfer
Given to poor but not money
111
Liberalism
Make decisions behind the veil of ignorance

Econ (2 decks)

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