Midterm Econ 101 Flashcards
What is the Command Economy?
The government decides what goods and services are produced at what price and also sets wages.
What is the traditional Economy?
What you produce, you consume
What is a Market Economy?
Decision-making is decentralized; it is based on private enterprise.
What is Specialization?
When workers or firms focus on particular tasks for which they are well suited within the overall process.
Why do countries like specializations?
Because they can produce the most of one good an benefit more in doing so.
Micro Econ
It focuses in actions within the economy be individuals.
Macro Econ.
It focuses in broad issues like inflation and unemplotyment.
Difference between Micro/Macro
Individual/broad econ issues
PPF
A diagram that shows max productively efficient combinations of two products that a economy can produce given its resources.
Positive Statements Econ
Based on facts that can be proven or disproven.
Negative Statements
It describes bad economic conditions
Law of Diminishing Returns
As we consume more of a good or service, the utility we get from more additional units becomes less satisfying.
Absolute advantage
The ability of an entity to produce more and better goods than another entity using the same amount of resources.
Demand and Supply Curve-Movement
A “movement along the demand or supply curve” refers to a change in the quantity demanded or supplied of a good solely due to a change in its price, while all other factors affecting demand or supply remain constant; essentially, it means moving up or down the existing curve without the curve itself shifting position.
Comparative advantage
Based on the opportunity cost of production. An entity should produce goods with the lowest opportunity cost, even if it doesn’t have the absolute advantage.
Demand and Supply Curve Shift
A “shift” in a demand or supply curve represents a change in the quantity demanded or supplied at every price level caused by factors other than the price itself, causing the entire curve to move left or right on the graph.
Normal Goods
A good that demand increases when income rises. And demand declines when income declines.
Inferior Goods
A good in which quantity declines when income rises. And demand increases when income decreases.
Substitute Goods
Are products or services consumers perceive as similar or comparable, allowing them to replace one another when economic conditions change
Complement Goods
These goods are often used together so that the consumption of one good tends to be better with the addition of another good. (Peanut butter and Jelly Sandwich).
Equilibrium Graph
The point in where Supply and Demand Meet.
Elasticity Calculations:
1. Elastic
2. Unitary
3. inelastic
- %change in quantity / %change in price>1 Elastic
- %change in quantity / %change in price=1 Unitary
- %change in quantity / %change in price<1 Inelastic
Perfect Competition
Many Firms and Identical Products
Types of Cost
1. Explicit Costs
2. Implicit Costs
3. Fixed Cost
4. Variable Cost
5. Total Cost
6. Marginal Cost
7. Average total cost (unit)
8. Average Variable Cost (unit)
- Out-of-pocket costs actual payments.
- Opportunity Cost of resources already owned by the firm and used in business.
- Does not change regardless of production level.
- Cost increases as production increases and decreases as production decreases.
- The sum of all fixed and variable costs.
- The cost by producing one more unit.
- The total cost to produce each unit.
- The total variable cost of porducing a certain quantity of goods divided by the quantity produced
7. The sum of the average fixed costs and the average variable costs
