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Münster SoSe 24 > Principles Of Economics > Flashcards

Principles Of Economics Flashcards

1
Q

Endogenous variables

A

Explained in the model

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2
Q

Exogenous variables

A

Logically given, are not in the model

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3
Q

Positive question

A

How are things?

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4
Q

Normative question

A

How things should be?

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5
Q

Opportunity cost

A

Cost of the upcoming best alternative

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6
Q

Comparative statics

A

How will change of some exogenous variable affect the model?

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7
Q

Marginal analysis

A

How will a marginal change of some variable affect the cost?

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8
Q

Ommited variables bias

A

One should not consider a correlation to be a causality when not taking into account all relevant variables

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9
Q

Reverse concellity bias

A

When not clear, one can’t be sure about the direction of the causality (it can be the other way)

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10
Q

Demand curve

A

Represents the relation between demand and price

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11
Q

Normal good

A

Product, which demand grows with the income of the buyer (e.g. chocolate:-)

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12
Q

Inferior good

A

Product, which demand falls with the income of the buyer (e.g. public transport)

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13
Q

Complements

A

Products, which demands move the same way; one depends on another

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14
Q

Accounting costs

A

The money needed to run the business

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15
Q

Opportunity costs

A

What’s the best alternative use of resources

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16
Q

Causality

A

Influence of one event/process/state/object is responsible for an ocurrence of another one

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17
Q

Casual effects

A

Change of an exogenous variable affects only one endogenous variable (and the other ones remain as before)

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18
Q

Correlation

A

Relationship between variables (doesn’t mean causality)

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19
Q

Equation

How can the buyer spend his money?

A

m = v_q + P × q

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20
Q

Excess supply

A

When the price is higher than WTP

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21
Q

Excess demand

A

When the demand is higher than the WTA

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22
Q

Surge pricing

A

Flexible adjusting of the price accordingly to the demand

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23
Q

Individual customer surplus

A

The difference between willing-to-pay and the amount the customer actually pays for the good

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24
Q

Individual producer surplus

A

The difference between willing-to-accept and the amount the supplier actually receives for the good

25
Q

Price Ceiling

A

Highest possible price that can be paid for a good

26
Q

Gains from trade (no equation)

A

Difference between the WTP and WTA for each Q_i

27
Q

Marginal damage

A

Additional cost which is not included in the price of the good

28
Q

Excess burden

A

Trades that will be normally traded but are not because of a tax

29
Q

Price discrimination

A

Charging a different price to different customers

30
Q

Non credible threat

A

A decision that the next player is threatening with, and which will be bad for the first to decide, but will be at the same time bad for the one threatening as well so he won’t really choose it → it can be ignored

31
Q

Entry deterrence

A

Discouraging potential competitors from entering a market

32
Q

Unravelling market

A

WTP is low → the offered quality gets lower → WTP gets lower → the offered quality gets lower → …

33
Q

Annuity

A

“prepaid” insurance product

34
Q

Adverse selection

A

One player has some info about the product that the other one doesn’t have

35
Q

Hidden action

A

One player does something (relevant to the game), and the other one doesn’t know it

36
Q

Labour income

A

The money the company has to pay to its employees

37
Q

Capital income

A

The money the company has to pay to its owners (stakeholders, shareholders…)

38
Q

Production approach to GDP

GDP =

A

GDP is the value of the company’s market production

= P × Q

39
Q

Expenditure approach to GDP

GDP =

A

GDP is the company’s expenditures, while the unsold products of the firm are added to those expenditures

= ∑ expenditures

40
Q

Income approach to GDP

GDP =

A

GDP is the revenue of the firm

= consumption + investment + expenditure + (export - import)

41
Q

Definition of GDP

Another definition of GDP

A

The market value of all final goods and services that are produced in an economy each year

The market value of the difference between revenue and intermediate loose of each company.

42
Q

Nominal GDP

impact of production change to nominal GDP =

Calculation by products a and b:
GDP0 (GDP in one year) =
GDP1 (GDP in some other year) =

A

compares one year’s productions by the same year’s prices

= real GDP

= Qa0 × Pa0 + Qb0 × Pb0
= Qa1 × Pa1 + Qb1 × Pb1

43
Q

This is the one in the news:

Real GDP

real GDP growth =

Calculation by products a and b:
GDP0 (GDP in one year) =
GDP1 (GDP in some other year) =

A

compares one year’s productions with some other year’s prices

= (real GDP_x - real GDP(x-n)) / (real GDP(x-n)

= Qa0 × Pa0 + Qb0 × Pb0
= Qa1 × Pa0 + Qb1 × Pb0

44
Q

GDP deflator =
what is it good for?

Consumer price index (CPI) =

Inflation rate (IR) =

A

= (nominal GDP) / (real GDP) ×100
Measures the impact of inflation to the GDP

= cost of sth_x / cost of sth_(x-n)

= (price index_x - price index_(x-n)) / price index_(x-n)

45
Q

Labour demand

A

the optimal number of workers hired by the company

46
Q

Marginal product of labour

A

how valuable is for the firm to hire one more worker (WTP for labour force)

47
Q

Frictional unemployment

A

when the employee exits the company, he is for some time unemployed anyway

48
Q

Multiplier effect

A

something (multiplier) amplifies the impact of a shock (= “vicious circle”)

49
Q

Government demand

A

the government can spend money to support the firms

50
Q

Automatic components

A

reactions of the government to the recession that happen automatically (e.g. taxes depending on the income get lower)

51
Q

Crowding-out effects

A
  • Both firms and state offer bonds
  • Firms may go bankrupt, states usually don’t – people prefer government bonds
  • Then the firms have less money to finance themselves
  • Less affects the firms that don’t rely on external funds
52
Q

Money market

A

a market, where the banks can borrow the money from another bank to disburse their customers

53
Q

Open market

A

a market between private banks and the central bank, where the banks can buy money they need in exchange for their stocks

54
Q

Refinancing rate

How is it used for the monetary policy?

A

the tax the bank has to pay for asking the central bank for money

  • By lower rate the central bank enforces the economic activity
  • By higher rate the central bank brakes the economic activity
55
Q

Expansionary policy

why is it used?

A

higher government expenditures

fiscal policy to support economics during recession

56
Q

Contractionary policy

why is it used?

A

lower government expenditures

fiscal policy to bake economics during boom

57
Q

Production change contribution to the change in GDP (formula)

A

ΔGDP × Δproduction / original production

58
Q

Price change contribution to the change in GDP (formula)

A

ΔGDP × Δprice / original price

Münster SoSe 24 (4 decks)

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