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ECON 101 MICRO > Midterm 1 Chapters 1-3 (Supply & Demand) > Flashcards

Midterm 1 Chapters 1-3 (Supply & Demand) Flashcards

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1
Q

Economics

A

Study of the choices people make & the actions they take to make the best use of scarce resources to meet wants & needs

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2
Q

Scarcity

A

Allocation of resources

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3
Q

How are Allocaitons Evaluated

A
  1. Efficiency
  2. Equity
  3. Moral & Political Consequences
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4
Q

Calculation of Net Benefits

A

Benefits - Costs

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5
Q

If Benefits of X > Cost …

A

DO activity X

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6
Q

If Benefits of X < Cost …

A

DO NOT do activity X

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7
Q

Contingent Valuation

A

What is this worth to you?

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8
Q

Thinking on the Margin

A

What’s the Benefits & Costs of adding a value

Marginal = Additional

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9
Q

Microeconomics

A

Choices & actions of individual economic units

  • EX: households, firms, consumers
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10
Q

Macroeconomics

A

Behavior of the entire economy

  • EX: unemployment, inflation, national income
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11
Q

Positive Economics

A

Statements about what is / can be tested by checking against observed facts

  • AKA Empirical Science
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12
Q

Negative Economics

A

Statements that depends on values & beliefs

- CANNOT be tested

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13
Q

Correlation Fallacy

A

Incorrect belief that Correlation = Causation

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14
Q

Post Hoc Fallacy - Special Case of Correlation Fallacy

A

Incorrect reasoning that a 1st event Causes a 2nd event because it occurred before the 2nd

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15
Q

Fallacy of Composition

A

Incorrect belief that what is true for an individual = true for a group

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16
Q

The Production Possibilities Frontier (PPF)

A

Show what we are capable of producing

(Unattainable VS Inefficient)

  • Combinations of goods that can be produced when the factors of production are at full-potential
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17
Q

Opportunity Cost (Opp Cost)

A

Benefit given up by not using the resources in the next best alternative way

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18
Q

Law of Increasing Cost

A

To produce extra amounts of a good, the supplier must give up increasing amounts of another good

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19
Q

Pure Centrally Planned

A

All decisions made by governemnt

20
Q

Market Chooses

A

Thousands of industrial choices directed by market prices

21
Q

Mixed Economy

A

Market economy guided by the government

22
Q

Absolute Advantage

A

Good / Service can be produced at a Lower Absolute Cost

  • # of Goods
23
Q

Comparative Advantage

A

Good / Service can be produced with a Lower Opportunity Cost

24
Q

Rationality Assumption

A

We assume people are motivated by self-interest & act rationally

  • Individuals do not make decisions that will leave them worse off

- The baker doesn’t make bread for the good for society, it’s to make $$$

25
Q

Quantity Demanded

A

Amount consumers wish to buy

26
Q

Law of Demand

A

As the product’s Price INCREASES, the Quantity Demanded DECREASES
As the product’s Price DECREASES, the Quantity Demanded INCREASES

27
Q

Changes in Quantity Demanded

A

Changes in Price corresponds to movements across Demand Curve

28
Q

Price of Substitute for good A Increases …

A

Demand for good A Increases

29
Q

Price of Complement of good A Increases …

A

Demand for good A Decreases

30
Q

Normal Goods

A

A commodity that Increases when your income Increases

  • EX: Going out to eat MORE after getting a raise
31
Q

Inferior Goods

A

A commodity that DECREASES when your income Increases

  • EX: Buying LESS ramen when you get a raise
32
Q

Law of Supply

A

As the product’s Price INCREASES, the Quantity Supplied INCREASES
As the product’s Price DECREASES, the Quantity Supplied DECREASES

33
Q

Change in Quantity Supplied

A

Change in Price corresponds to a movement along the curve

34
Q

As Technology IMPROVES …

A

Costs Decreases, Increase in Supply

35
Q

Costs of Inputs INCREASE …

A

Supply Curve shifts, Decrease in Supply

36
Q

Number of Firms INCREASE …

A

Supply Increases

37
Q

Taxes INCREASE …

A

Costs Increase, Supply Decreases

38
Q

Equilibrium

A

Where Supply Curve interesects with the Demand Curve

- When the Market Clears

39
Q

FOUND the Equilibrium

A

When Quantity Supplied = Quantity Demanded

40
Q

The Invisible Hand

A

A metaphor for the unseen forces that coordinates economic actions & allocation of resources

41
Q

The Invisible Foot

A

How political / legal policies & regulations have the opposite effect of what is intended in influencing the market

42
Q

Why do we need governments to take part in the market economy?

A
  • To conform to social, cultural, legal, political norms
  • Allocation of resources
  • To correct failing markets
43
Q

Price Floor

A

Government set the MINIMUM Price for good / service

  • EX: Minimum Wage Laws
44
Q

Price Ceiling

A

Government sets the MAXIMUM Price for good / service

  • EX: Rent Ceilings
45
Q

Quotas

A

Government sets MAXIMUM Quantity for a good / service

46
Q

The Invisible HandShake

A

Combination of Social & Historical forces & Cultural norms that influence market outcomes

ECON 101 MICRO (2 decks)

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