Random Review Flashcards
Globalization
The process of greater interdependence among countries and their citizens. Increased interaction of product and resource markets.
Waves of Globalization (dates)
- Industrial - WWI (1870-1914)
- WWII - 1980’s (1945-1980)
- 80’s - Present (1980-Now)
Equation for Openness
(Exports + Imports) / GDP
Fallacies of International Trade
- Zero-sum game
- Imports = bad, exports = good
- Tariffs, quotas, etc. save jobs and promote employment
Absolute Advantage
When a country can produce more of any set of goods with fewer inputs.
Commodity Terms of Trade
(Export Price Index / Import Price Index) x 100
Heckscher-Ohlin Theory
Factor endowment
Overlapping Demand Theory
Rich countries want more expensive goods and poor countries demand cheap goods
Increasing Opportunity Costs
Curve is bowed outward
Cyclical Unemployment
Results from fluctuation in economic activity–business cycles
(Ideal level = 0)
Frictional Unemployment
People moving from one job to another; includes seasonal unemployment
(ideal level = 2-2.5%)
Structural Unemployment
Open jobs but people don’t have necessary skills
ideal level = 2-2.5%
Unemployment Rate
(# of unemployed persons / labor force) x 100
Employment Act of 1946
Gives responsibility to government to create full employment (aka 4.5%)
Technical Efficiency
Any point along the production possibilities curve - infinite number of points
Allocative Efficiency
ONE POINT along the curve that makes society’s overall welfare/ satisfaction as high as it can be.
Law of Increasing Relative Costs
In order to get extra amounts of one good, society must sacrifice ever-increasing amounts of other goods.
Determinants of Investment
- Cost of production
- Taxes
- Technological change
- Stock of Capital Goods
- Expectations
Determinants of Consumption
- Consumers’ accumulated wealth
- Price level
- Economic expectations
- Current levels of debt
- Stock of durable goods
- Taxes
Determinants of Demand
- Income
- Price of related goods
- Future prices
- Tastes/ preferences
- Advertising
Determinants of Supply
- Price of inputs
- Number of sellers
- Technology (automation)
- Weather
- Political disruptions
- Price of related goods
Determinants of Elasticity
- Availability of substitutes
- Proportion of income
- Luxury v. Necessity
- Elapsed time of purchase choice
Ranges of Elasticity
In terms of absolute value:
> 1 = Elastic
< 1 = Inelastic
= 1 = Unit elastic
Longitudinal Data
Many entities over time
Cross Sectional Data
Many entities one time period
Delphi Method
Employs independent party to elicit a consensus opinion
Time Series Data
One entity over time
Oligopoly Characteristics
- Few sellers
- Unique or homogeneous product
- Blocked entry/ exit
- Imperfect information
Monopolistic Competition Characteristics
- Large # of buyers and sellers
- Comparable and differentiated products
- Free entry and exit
- Perfect information
Perfect Competition Characteristics
- Large # of buyers
- Large # of sellers
- Identical product
- Free entry/ exit
- Perfect information
Monopoly Characteristics
- One seller
- Unique product
- Blocked entry and exit
- Imperfect information
Opportunity Cost of Good “A”
(maximum production of “b”) /
maximum production of “a”
Cobb-Douglas Production Fcn
Q = a * K^alpha * L^beta
alpha + beta = 1 => constant returns
Point Elasticity of Demand
dQ/dP * P/Q
