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Gen Bus 310 > Mod 2 > Flashcards

Mod 2 Flashcards

1
Q

Goal Orientated Behavior

A

Behavior of market participants interested in fulfilling their own personal goals

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2
Q

Rational Behavior

A

The behavior of market participants based on a careful, deliberate process that weighs expected costs/benefits

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3
Q

Explicit cost

A

Money used in pursuit of a goal that could have been spent on a different object

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4
Q

Implicit Costs

A

Foregone benefits from the use of time and other resources in pursuit of a goal

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5
Q

Opportunity Cost

A

Explicit cost + implicit cost

Value of what is foregone by choosing one option over another

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6
Q

Production Possibility Frontier

A

Depiction of all the different combinations of goods that a rational person with certain goals can attain with a fixed amount of resources

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7
Q

Absolute Advantage

A

Ability to produce more goods or services with a set of resources than another market participant

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8
Q

Comparative Advantage

A

Ability to produce a good or service at a lower opportunity cost per unit

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9
Q

Mutually Beneficial Bartering Price

A

The exchange rate is between opportunity costs

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10
Q

Benefits of Middleman (3)

A

Encourages specialization

Facilitates trade

Increases production

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10
Q

Why Trade? (4)

A

Individuals face scarcity and tech constraints

Individuals have different abilities

Produce more when focusing on advantage (higher GDP)

Both are better off with/ specialization and trading

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10
Q

Dealer

A

A market intermediary that always stands ready to buy from sellers at the bid price and sells to buyers at the asking price and takes the bid-ask spread as the per-unit profit

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11
Q

Bid Price

A

The price at which a dealer buys inventory

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11
Q

Ask Price

A

The price at which a dealer sells inventory

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11
Q

Dealer Opportunity Cost

A

Could be involved in trade somewhere else

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11
Q

Bid-Ask Spread

A

A dealer’s per-unit profit from buying low at the bid price and selling high at the ask price

12
Q

Medium of exchange

A

An intermediary instrument used to facilitate the sale, purchasing, or trading of goods between parties

12
Q

1 Determinant of Bid-Ask Spread

A

The number of competitors

12
Q

Disadvantage of Barter (5)

A

Goods aren’t easily divisible (integer values)

Goods aren’t uniform

Have to expend resources to authenticate goods

Goods aren’t easily portable

Value of goods diminishes over time (quality)

12
Q

Double Coincidence of Wants

A

Difficulty in barter economy where it is improbable that traders will find counterparties who have the desired goods at the correct time in the correct place

12
Q

Store of Value

A

An asset that can be saved, retrieved, and exchanged at a later time, and can be predictably useful when retrieved

13
Q

Unit of Account

A

A unit of measure used to value goods, services, and other economic items

13
Q

Fungible

A

Individual units that are capable of mutual substitution (interchangeable)

13
Q

Fiat Money

A

Currency that a government has declared to be legal tender, but has no intrinsic value and is not backed by a physical commodity

14
Q

Economic Assumptions

A
  1. Goal orientated behavior
  2. Rational behavior
  3. Unlimited wants/desires
  4. Scarce time and money
15
Q

Roles of Money (3)

A

Medium of exchange

Unit of account

Store of value

16
Q

Qualities of Money (7)

A

Easy to authenticate

Difficult to counterfiet

Divisible

Fungible

Portable

High value-weight

Uniform

17
Q

Accounting Costs

A

Costs recorded and reported by a company’s accounting information system on its income statement

18
Q

Dealer Market

A

A market where buyers and sellers for a good/service transact through a dealer. The dealer must hold inventory and there is a risk that the price of the inventory may change while waiting to be sold.

18
Q

Barter

A

To trade goods or services directly between two or more parties without the use of money as an intermediary

18
Q

Sunk Cost Fallacy

A

Psychological tendency to include sunk costs when making economic decisions even though they should be ignored

18
Q

Commodity Money

A

Objects that have value in themselves as well as their use as a medium of exchange, unit of account, and store of value

18
Q

Scarce Resources

A

Insufficient time, money, or other desirable things individuals use to satisfy desires

18
Q

Sunk Costs

A

Costs that have already been incurred and are beyond recovery

18
Q

Markets

A

Interplay of all potential buyers and sellers of a certain good/service

18
Q

Microeconomics

A

Study of how small economic units (indivuals and firms) allocate scarce units

19
Q
A

Gen Bus 310 (15 decks)

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