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ECON 101 > modules 1-12 > Flashcards

modules 1-12 Flashcards

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1
Q

microeconomics

A

actions on a small scale, how do consumers choose to purchase goods

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2
Q

opportunity cost

A

what we give up in order to pursue a certain thing

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3
Q

thinking on the margin

A

comparing the costs and benefits of a little more/less

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4
Q

marginal costs and benefits

A

the costs/benefits of incremental changes

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5
Q

incentives

A

rewards, punishments, and prices, how people choose their purchases

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6
Q

market

A

a group of buyers and sellers

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7
Q

invisible hand

A

when people in markets base their action on self interest, they often do what’s best for society

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8
Q

circular flow diagram

A

economic model that pictures consumers and producers interacting in goods & services and the factors of production

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9
Q

flow of inputs in circular flow diagram

A

households sell inputs (factors of production), businesses use these to create goods and services, businesses sell goods

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10
Q

flow of money in circular flow diagram

A

households spend on g+s, businesses use money of production, remaining money goes to wages (back into households)

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11
Q

production possibilities frontier

A

graph of the number of goods an economy can produce based on available resources

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12
Q

absolute advantage

A

ability of one producer to make goods using fewer inputs

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13
Q

comparative advantage

A

ability to make a good at a lower opportunity cost relative to another producer

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14
Q

competitive market

A

market where the goods are similar and no one individual impacts the price significantly

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15
Q

law of demand

A

demand for a good changes inversely to its price

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16
Q

market demand

A

sum of the quantity demanded at each price point by all consumers in a market

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17
Q

factors that shift the demand curve

A

change in number of buyers, buyer income, price changes in related goods, taste changes, buyers expectations

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18
Q

normal goods

A

goods where the demand goes up when income increases

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19
Q

inferior goods

A

goods where demand goes up if income decreases

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20
Q

law of supply

A

quantity supplied changes in direct relation to its price

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21
Q

factors that shift the supply curve

A

numer of sellers, price of inputs, price of related goods, sellers expectations

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22
Q

substitute goods

A

goods that can be produced from the same resource (rise in price of one shits the other’s supply curve left)

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23
Q

complement goods

A

goods that are jointly produced (by-product), rise of price in one shifts the supply curve right

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24
Q

market equillibrium

A

point where supply and demand curves intersect (most stable

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25
Q

price elasticity of demand

A

how sensitive demand is to changes in price

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26
Q

what does a flatter demand curve mean

A

a more elastic price elasticity of demand

27
Q

quantity effect

A

how much revenue decreases if price increases causes decreased quantities

28
Q

when will revenue increase when price increases

A

an inelastic market

29
Q

what markets are more elastic

A

goods with close substitutes, luxury items

30
Q

what markets are less elastic

A

broadly defined markets (lack of substiutes in a wide product range), relatively inexpensive items

31
Q

income elasticity of demand

A

how responsive demand is to changes in income (normal +, inferior -)

32
Q

cross price elasticity of demand

A

how responsive demand is for one when the other changes ( substitutes +, complements -)

33
Q

price elasticity of supply

A

how responsive selers are to price changes (flatter = more elastic)

34
Q

price celings

A

legislation that bars businesses from hiking prices

35
Q

binding price celings

A

price ceilings below eq’m price, causes a shortage

36
Q

consumer surplus

A

purchases under someone’s willingness to pay (think stairs), area under demand curve, over price

37
Q

falling consumer surplus

A

prices rise past a groups willingness to pay, people exit market, others now have to pay more

38
Q

producer surplus

A

sales above a seller’s willingness to sell, area under price and above supply curve

39
Q

marginal buyer/seller

A

first people to leave market when prices rise/fall

40
Q

how do taxes shift the demand curve

A

shift the demand curve down/left, drive a wedge between price paid and price received.

41
Q

who bears most of the burden of taxation

A

whichever group is less elastic (other group will leave the market)

42
Q

3 key effects of taxes

A

increase price paid, decrease price received, lower quantity bought/sold

43
Q

deadweight loss

A

fall of total surplus due to market distortion

44
Q

how are deaweight loss and taxes related

A

deadweight loss increases faster than taxes

45
Q

laffer curve

A

the relationship between tax revenue and tax size

46
Q

domestic price

A

price without trade, adjusts to match world price

47
Q

arguments for trade restrictions

A

tade destroys jobs in importeed industries, industry important to national security should be protected, new industries should be nutured

48
Q

tariff

A

tax applied to specific imports

49
Q

benefits of trade

A

increased variety, lower costs (per unit), fewer monopolies, flow of ideas/tech, could help with peace

50
Q

negative externalities

A

unintentional social costs that are not borne by the individual responsible

51
Q

social cost

A

expenses incurred by a society from the sale of a good

52
Q

how to correct negative eternalities

A

internalizing it, corrective taxes

53
Q

where is the most efficient price when externalities are considered

A

intersection of social cost/demand (negative externalities), or social value and supply

54
Q

command and control policies

A

direct government control over specific actions

55
Q

market-based policy for externalities

A

incentivisation to choose the socially optimal quantity

56
Q

corrective taxes and subsidies

A

aka pigouvian taxes, matches market supply/demand to socially optimal

57
Q

tadeable permits

A

predetermined caps that can be traded between businesses

58
Q

coase theorem

A

private parties can bargain over allocatiion of resources and solve externalities on their own

59
Q

private goods

A

excludable, rival

60
Q

club goods

A

excludable, nonrival

61
Q

common resources

A

non-excludable, rival

62
Q

public goods

A

non-excludable, non rival

63
Q

free rider problem

A

no incentive to pay for the good, benefit from those who will pay

ECON 101 (1 decks)

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