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INTRO TO ECON > ppt 0-1, 3, 7, 10: definitions of econ, supply & demand, equilibrium > Flashcards

ppt 0-1, 3, 7, 10: definitions of econ, supply & demand, equilibrium Flashcards

1
Q

scarcity

A

the limited nature of society’s resources

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2
Q

economics

A

the study of how society manages its scarce resources

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3
Q

efficiency

A

the property of society getting the most it can from its scarce resources (the size of the economic pie)

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4
Q

equity

A

the property of distributing economic prosperity fairly among members of society (how the pie is divided)

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5
Q

marginal changes

A

small incremental adjustments to a plan of action i.e. deciding to watch another kdrama ep instead of reviewing econ

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6
Q

market economy

A

an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

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7
Q

“invisible hands”

A

the notion coined by Adam Smith that firms and households act in the market as if they’re guide by an ‘invisible hand’ that leads them to desirable market outcomes

Smith claims participants in the economy are motivated by self-interest and that the “invisible hand” of the marketplace guides this self-interest into promoting general economic well-being

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8
Q

what are two reasons why government would interfere in economy?

A

to promote efficiency and promote equity

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9
Q

market failure

A

a situation in which a market left on its own fails to allocate resources efficiently

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10
Q

externality

A

the impact of one person’s actions on the well-being of a bystander

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11
Q

market power

A

the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices (aka a monopoly) -> government intervention can mean introducing policies to help regulate this, improving efficiency

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12
Q

productivity

A

the amount of goods and services produced from each hour of a worker’s time

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13
Q

what causes inflation?

A

growth in the quantity of money

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14
Q

circular-flow diagram

A

a visual model of the economy that shows how dollars flow through markets among households and firms

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15
Q

t or f: in markets for goods and services, firms sell and households buy

A

true

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16
Q

t or f: in markets for factors of production, households buy and firms sell

A

false

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17
Q

microeconomics

A

the study of how households and firms make decisions and how they interact in markets

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18
Q

macroeconomics

A

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

19
Q

positive statements (positive science)

A

claims that attempt to describe the world as it is

20
Q

normative statements (normative art)

A

claims that attempt to prescribe how the world should be

21
Q

what are some examples of factors of production?

A

land: pay rent
labour: pay wages
capital: pay interest

22
Q

catallatics

A

the “Science of Exchanges”, as coined by Richard Whately .

Claims that to satisfy needs and desires there are two ways: by force (usually gov’t) or through peaceful exchange in the market

23
Q

population, when unchecked, increases in what sort of ratio? what does this mean?

A

geometric: population is growing exponentially, with the rate of growth proportional to the size of the population. In other words, as the population grows larger, the rate of growth also increases. This type of growth is often represented by a J-shaped curve on a graph.

24
Q

subsistence increases in what sort of ratio? what does this mean?

A

arithmetical: the availability of resources or the means of subsistence are increasing at a constant rate over time. This type of growth is linear and is represented by a straight line on a graph

25
Q

absolute scarcity can be related to what in-class examples

A

Thanos - Gamora?

26
Q

positive time preference

A

to pay positive interest rates to get access to resources in the present; i.e. you should be paying goldman sachs to work there. choosing 1 mil today vs 2024 is positive time pref

27
Q

What are the 3 fundamental economic problems?

A

What commodities shall be produced and in what quantity?
How shall goods be produced?
For whom shall goods be produced?

28
Q

substitute good

A

a good that has many of the same characteristics as and can be used in place of another good

29
Q

complement good

A

a good that is consumed or used together with another good

30
Q

independent good

A

change in price of a good does not affect the demand of the good we are interested in

31
Q

a SHIFT in the demand curve occurs from what? what direction does it occur in?

A

factors OTHER THAN price (i.e. market expectancy, consumer preferences)

Shifts are left and right

32
Q

a MOVEMENT in the demand occurs from what? what direction does it occur in?

A

changes ONLY in price

movement is up and down -> affects QUANTITY demanded. not demand

33
Q

what is a demand schedule?

A

a table that shows the relationship between the price of a good and the quantity demanded

34
Q

ceteris paribus

A

all things equal aka all variables other than the ones being studied are assumed to be constant

35
Q

supply schedule

A

a table that shows the relationship between the price of a good and the quantity supplied

36
Q

equilibrium

A

a situation in which supply and demand have been brought into balance

37
Q

equilibrium price

A

the price that balances supply and demand

38
Q

equilibrium quantity

A

the quantity supplied and the quantity demanded when the price has adjusted to balance supply and demand

39
Q

Why do the activities of buyers and sellers automatically push the market price towards the equilibrium price?

A

To avoid surpluses and shortages, which all eventually move towards equilibrium anyways to compensate

40
Q

law of supply and demand

A

the price of any good adjusts to bring the supply and demand for that good into balance

41
Q

What are the three steps in analyzing changes in equilibrium?

A
  1. Describe whether the event shifts the SUPPLY curve or DEMAND curve (or both)
  2. Decide which direction the curve shifts
  3. Use the supply-and-demand diagram to see how the shift changes the equilibrium
42
Q

why do we call buyers and sellers price takers?

A

because buyers and sellers in perfectly competitive markets must accept the price the market determines

43
Q

how do government taxes, subsidies, and regulations affect supply?

A

increase in taxes (payments by firms to the govt) or a decrease in subsidies (payment by govt to firms) will decrease supply

a decrease in taxes or an increase in the subsidies will increase supply

INTRO TO ECON (5 decks)

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