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macro > test 1 > Flashcards

test 1 Flashcards

1
Q

what is economics

A

how society uses its limited resources to satisfy its unlimited human wants.

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2
Q

what is the problem with economics

A

resource scarcity

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3
Q

why is economics a social science

A

concerned with how individuals, groups, societies respond to scarcity

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4
Q

what is macroeconomics

A

study of the behaviour of the economy as a whole. Nation-wide. Focuses on the aggregate economic values like inflation, national income and outputs. Measured by the gross domestic product (GDP) or gross national product (GNP) and unemployment

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5
Q

what is microeconomics

A

how specific industries function within the economy, individual units (firms, households)

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6
Q

what is opportunity cost

A

resources are scarce so every choice involves giving up another opportunity. Value of the best alternative that must be given up

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7
Q

what is the OC formula

A

OC= explicit cost + implicit cost - sunk cost

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8
Q

what is the explicit cost

A

direct outlay or spending of $ on a choice

EX.: decision to attend uni is the tuition fees or transportation costs that you must pay

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9
Q

what is the implicit cost

A

not a direct outlay, represents a value given up

EX.: while in uni, you give up the salary that you could be earning if you didn’t decide to attend

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10
Q

what is the sunk cost

A

irreversible cost irrelevant to a decision
EX.: Thomas wants to buy a resto, spends 1500$ to see if he can afford it, turns out secant afford it so that 1500$ is lost

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11
Q

what is the positive economic analyses

A

based on statements that can be tested by observing the facts . View the world as it is

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12
Q

what is the normative economic analyses

A

based on value judgement. View the world as it should be

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13
Q

what is scarcity

A

when human wants exceeds the productive capacity of existing limited resources

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14
Q

what are human wants

A

goods and services (commodities) that we wish to consume and that have value in return

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15
Q

what are resources

A

the inputs used in the production of the things that we want

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16
Q

what are natural resources (land)

A

nonhuman gifts of nature

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17
Q

what is labor

A

productive contributions made by workers

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18
Q

what is human capital

A

education and training of workers (increases productivity)

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19
Q

what is physical capital

A

available stocks of factories, equipment, machinery, and infrastructure used in production. Man-made

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20
Q

what is entrepreneurship

A

Human Resources that perform the functions of risk taking, organizing, and managing the other factors of production

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21
Q

is financial capital a productive resource

A

NO. it is the financial assets that measure one’s ownership and access to goods, services, and physical capital

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22
Q

is financial capital a productive resource

A

NO. it is the financial assets that measure one’s ownership and access to goods, services, and physical capital (money, bonds, stocks)

23
Q

what are factor incomes

A

amount of payment or reward received by each type of resource for it’s contribution to procution

24
Q

what is the factor income for land

A

rent

25
Q

what is the factor income for human resource (labor and human capital)

A

wages and salaries

26
Q

what is the factor income for physical capital

A

interest and dividends

27
Q

what is the factor income for entrepreneurship

A

profit

28
Q

what is the production possibilities curve

A

a graph of all the possible production combinations of two goods or services that can be produced. Trade off between two goods. Measured over a specific time period. No technological change over that time frame. No increase or decrease in the quantity or quality of the resource

29
Q

what is a production possibilities schedule

A

table that can be graphed and converted into a PPF/PPC

30
Q

what does it mean if a point is above and below the PPC

A

above: unobtainable, resources are scarce
below: can be produced but inefficient because of unemployment. Possible to produce more of one good without decreasing the quantity of the other good

31
Q

how to calculate OC from PPC

A

OC=what we give up/what we get

32
Q

formula of OC of cars (with wheat)

A

OCcars=change in wheat/change in cars

33
Q

formula of OC of wheat (with cars)

A

OCwheat=change in cars/change in wheat

34
Q

what is a market

A

meeting place or a set of rules that connect two groups of economic agents in the exchange of goods and services

35
Q

what is a demand

A

quantities of a specific good or service that consumers in a particular market are willing to purchase at various possible prices, ceteris paribus

36
Q

what is the law of demand

A

there is an inverse relationship between the price of any good or service and its quantity demanded
downward slope

37
Q

what are the three forms of market demand

A
  1. market demand schedule (table)
  2. market demand curve (graph)
  3. market demand equation *not on test
38
Q

what is a supply

A

quantities of a specific good or service that firms are willing to sell at various possible prices

39
Q

what is the law of supply

A

there is a direct relationship between the price of any good or service and its quantity supplied
upward slope

40
Q

what are the free forms of market supply

A
  1. market supply schedule
  2. market supply curve
  3. market supply equation
41
Q

what is a market equilibrium

A
  • putting supply and demand together

- point where quantity supplied and demanded are equal

42
Q

what are the two dimensions of the market equilibrium

A
  1. equilibrium price (P*): price where Qs=Qd

2. equilibrium quantity (Q): quantity bought and sold at the P

43
Q

what is a market disequilibrium

A
  • Qd is not equal to the Qs at any price

- when firms want to supply more or less of a good or service than buyers want to purchase (Qd>Qs, Qd

44
Q

what are the two cases of market disequilibrium

A
  1. excess supply (surplus): Qs exceeds Qd at any price
    (Qs-Qd=positive number) (P goes down) (P>P*)
  2. excess demand (shortage): Qs is less than Qd
    (Qs-Qd=negative number) (P goes up) (P<p></p>
45
Q

what does productive efficient mean

A

when all available resources are used fully and efficiently in a way that maximizes the economy’s total output of goods and services. Impossible to produce more of one good without decreasing the quantity of the other good

46
Q

what is allocative efficiency

A

when the one production combo of goods and services most highly valued by society is produced

47
Q

what are commodities

A

goods and services
-goods: standard, physical/tangible goods
digital goods
-services (intangible items)

48
Q

what are standard/physical goods

A

tangible and can be touched, rival goods (cannot be used by more than 1 person at the same time)

49
Q

what are digital goods

A

stored and transferred in digital form, non-rival (your whole family is watching Netflix at the same time)

50
Q

what are services

A

intangible forms of work done for others (educational services)

51
Q

what is a shift in demand

A

increase in demand, which means the P* also goes higher \ (second one)
vice versa

52
Q

what are the determinants of demand

A 
income
tastes and preferences
price of related goods
expectations
population (number of buyers)
53
Q

what is a shift in supply

A

increase in supply, which means the P* goes down // (second one)
vice versa

54
Q

what are the determinants of supply

A 
costs of inputs
technology and productivity
taxes and subsidies
price expectations
number of firms in the industry

macro (3 decks)

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