Midterm 1 Flashcards
We are faced with limited resources and unlimited human wants and needs. What in one word makes economizing necessary?
Scarcity
What law systems seem to do a better job at enforcing contracts and securing property rights according to Miller?
English common law
What institutions (rules of the game) are the most important for economic growth?
Political stability, secure private property rights, and legal system based on the rule of law.
What do economists have to say about the idea that “wealth = material things”?
Wealth is subjective
As we did in class, be able to compare opportunity cost of production (PPF) and figure out who has a comparative advantage in producing a good
Common sense
The Coke versus Pepsi challenge illustrated
Elastic demand and supply
How does Miller explain the growing American waistline?
If your time is worth more, because you are making more money, you are more likely to go eat fast food because it’s more time sensitive. Also, the woman in the work force has led to a lack of home cooked meals.
The most famous example of “Incentives Matter” in Economics according to Roberts?
The idea, that when something gets more expensive, people buy less of it. Demand Curve. Jail birds going to Australia, keeping them alive, gets the guards more money.
Be prepared to perform an elasticity calculation using this formula: Percentage change in quantity demanded divided by the percentage change in price.
In notes
Be able to determine from an elasticity calculation whether the demand for a good is relatively elastic or inelastic.
Elastic > 1, Inelastic
Market-based systems ration scarce goods based on what criteria? (not by ripping phone books in half)
Supply and Demand
Know the shifters of supply very well
PIPER: Population, Income, Preferences, expectation of future prices, related goods (subsitutites, and compliments goods)
Forcing yourself to do something you aren’t enjoying, so you can get your time/money “worth”
Sunk Cost
What are the shifters of the demand curve?
INERT: Input goods, number of producers, expectations, related goods, technology
The My Cookie activity we did in class illustrated:
Spontaneous order
What were we illustrating with the “house fire” example in class?
Opportunity cost
We showed the Mousemate video with with Barats and Bereta in class to illustrate:
Rules of the game
Why did Von Mises predict that the new Soviet socialist economy would never work?
Price control
What was Keynes’s solution to end high unemployment?
Increase government spending
What happened when the Labor Party came into power in Britain in 1945?
The nationalization of Industries. The economy became a mixed economy
In 1971, it seemed that stagflation signaled the end of Keynesianism. You had two things at the same time, which under the Keynesian view would have been impossible. You had stagnation in the economy, high level of unemployment. You had inflation, with prices rising rapidly. Going against the advise of his economic advisor Milton Friedman, what formed the basis of President Nixon’s new economic policy?
Wage of price controls
One of the most important things that the government of Margaret Thatcher does is invent something called?
Privatization: selling nationalized industries.