Unit 1 Basic Economics Flashcards

1
Q

Which of the following is an example of a resource?
I. Petroleum
II. A factory
III. A cheeseburger dinner

A

I & II only

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2
Q

Suppose that you prefer reading a book you already own to watching TV and you prefer watching TV to listening to music. If these are your only 3 choices, what is the opportunity cost of reading?

A

Watching TV

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3
Q

Which of the following is/are normative?
I. The price of gasoline is rising
II. The price of gasoline is too high
III. Gas prices are expected to fall in the near future

A

II only

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4
Q

Which of the following situations represent(s) resource scarcity?
I. Rapidly growing economies experience increasing levels of water pollution
II. There is a finite amount of petroleum in the physical environment
III. Cassette tapes are no longer being produced

A

I & II only

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5
Q

Economic

A

The study of scarcity and choice

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6
Q

Individual Choice

A

Decisions by individual about what to do and what not to do

Ex: Target has stuff you like, you like everything but can’t buy everything therefore have to make choices

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7
Q

Economy

A

A system that coordinated choices about production w/choices about consumption and distributes goods/services to the people who want them

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8
Q

US has a market economy which means…

A

Production and consumption are the result of decentralized decisions by many firms and individuals

  • no central authority say what to produce or where to ship it
  • individual producer decides what they think is profitable and consumers choose to buy/not buy
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9
Q

Command Economy

A

Industry is publically owned and there IS a central authority making production and consumption decisions

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10
Q

What economy did the Soviet Union practice in 1917 and 1991? What happened?

A

Command Economy
- didn’t work well because consumers didn’t want the products being produces and there were no materials to use to make products

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11
Q

Incentives

A

Rewards or punishments that motivate particular choices

- market economy can lower or raise price

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12
Q

Property Rights

A

Establish ownership and grant individuals the right to trade goods and services with one another
Ex. Own lake therefore takes care of lake pollution for its potential profit

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13
Q

Marginal Decisions

A

Decisions of what to do with next ton of pollution, hour of free time, next dollar, etc.
- compares cost vs benefits

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14
Q

Marginal Benefit

A

Gain from doing something one more time

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15
Q

Marginal Cost

A

Cost of doing something one more time

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16
Q

Marginal Analysis

A

The study of the costs and benefits of doing a little not more of an activity vs a little bit less

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17
Q

Examples of limiting factors…

A

Time and income

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18
Q

Resource

A

Anything that can be used to produce, sometimes called factor of production

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19
Q

The 4 types of Resource

A

Land: timber, materials, H2O
Labor: effort of workers
Capital: machinery, buildings, tools, etc
Entrepreneurship: risk taking, innovation, and organization of resources for production

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20
Q

A resource is scarce when…

A

There’s not enough to satisfy the society’s needs/wants

- ex. Oil/coal, clean air, H20; society must make a choice

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21
Q

Opportunity Cost

A

What you must give up in order to get the next best thing

  • all costs are opportunity costs
  • ex. College- state vs. local college
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22
Q

Microeconomics

A

The study of how individuals. Households and firms make decisions and how those decisions interact

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23
Q

Macroeconomics

A

Concerned with the overall ups and downs of the economy

- focuses on Economic aggregates

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24
Q

Economic Aggregates

A

Economic measures that summarize data across many different markets

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25
Q

Positive Economics

A

Branch of economic analysis that describes the way the economy ACTUALLY WORKS

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26
Q

Normative Economics

A

Makes prescriptions about the way the economy SHOULD WORK

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27
Q

Economic Models

A

Provide simplified representations of reality (ex. Graphs and tables)
- good for answering what if questions

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28
Q

Media coverage….

A

Exaggerates the views shared among economists (matter or boring/amusing content)

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29
Q

Economics tied to politics therefore have…

A

An incentive to find and promote economists who profess those opinions

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30
Q

In reality economists disagree due to…

A
  • difference in values

- differences in the way economic analysis is conducted can lead to different conclusions

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31
Q

What is an example of a resource:

  • petroleum
  • factory
  • cheese burger dinner
A
  • petroleum and factory
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32
Q

Which is not any example of scarcity

A

Not enough physicians

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33
Q

Business Cycle

A

The alternation between economic downturns, known as recessions, and economic upturns, known as expansions

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34
Q

Depression

A

Very deep and prolonged downturn

- last one was Great Depression -1930s

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35
Q

Recessions

A

Periods of economic downturns when output and employment are falling

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36
Q

Expansions(Recoveries)

A

Periods of economic upturns when output and employment are rising

  • recessions last about 11 months
  • expansions about 58 months
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37
Q

Employment

A

of people who are currently working for pay in the economy

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38
Q

Unemployment

A

of people who are actively looking for world but aren’t currently employed

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39
Q

Labor Force

A

The sume of employment and unemployment

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40
Q

Unemployment Rate

A

The percentage of labor force that is unemployed

  • good indicator of what conditions are like in the job market
  • even in most prosperous times there is some unemployment
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41
Q

Business cycle also about OUTPUT

A

The quantity of goods and services produced

- in business cycle, the economy’s level of output and its unemployment move in opposite directions

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42
Q

Output

A

The quantity of goods and services produced

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43
Q

Aggregate output

A

The economy’s total production of goods/services for a given time period

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44
Q

Inflation

A

Rising overall price level

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45
Q

Deflation

A

Falling overall price level

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46
Q

Issue with inflation

A

Money won’t be worth as much therefore people stop holding cash

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47
Q

Issue with deflation

A

Dollar will buy more than before therefore people will hold on to it rather than investing in new factories and other productive asserts

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48
Q

General goal of Price stability:

A

When the overall price level is changing if at all

49
Q

Economic Growth

A

An increase in the max amount of goods and services an economy can produce

50
Q

Trade

A

When individuals provide goods and services to others to receive goods and services in return

51
Q

Gains from trade

A

People can get more of what they want through trade than they could if they tried to be self-efficient
- increase in output is due to specialization

52
Q

Specialization

A

Each person specializes in the task that they are good at performing

53
Q

Comparative Advantage

A

the advantage conferred by an individual is the opportunity cost of producing the goos is lower for that individual than for other people

54
Q

Absolute advantage

A

The advantage conferred by the ability to produce more of a good with a given amount of time and resources

55
Q

Market

A

A group of producers and consumers who exchange ea food or service for payment who exchange a good ro service for payment

56
Q

Competitive market

A

Market in which there are many buyers and sellers of the same good/service, non of whom an influence the price of which te good/service is sold

57
Q

Demand Schedule

A

A table that shows how much of a good or service consumers will want to buy at different prices

58
Q

Quantity demanded demanded

A

The actual amount of a food a consumer is willing to buy at some specific price

59
Q

Demand Curve

A

A graphical representation of the demand schedule. It shows the relationship between quantity demanded and price

60
Q

Law of demand

A

A higher price of a good all other things being equal. Quantity of that good price increases while quantity demanded decreases

61
Q

Change in demand

A

A shift of the demand curve, which changes the quantity demanded at any given time

62
Q

Movements along the demand curve

A

A change in the quantity demanded of a food that is the result of a change in the good’s price

63
Q

5 factors that shift demand

A
  • Prices of related goods/services
  • Income
  • Tastes
  • Expectations
  • Number of Consumers
64
Q

Substitutes

A

2 goods are subs if a rise in the price of one of the goods increases the demand of the other

65
Q

Compliments

A

2 goods are compliments if rise in price of 1 good leads to decreases of demand of the other good

66
Q

Normal Goods

A

When a rise in income increases the demand for a good

67
Q

Inferior Good

A

When a rise in income lowers demand for good

68
Q

Individual demand curve

A

Illustrates the relationship between quantity demanded and price for an individual consumer

69
Q

Market Demand Curve

A

Shows how the combined quantity demanded by an consumers depends an market price of a good

70
Q

Which of the following would decrease demand for a normal good? A decrease in..

A

the price of a compliment

71
Q

A decrease in the price of butter would most likely decrease demand for…

A

Margarine

72
Q

If an increase in income leads to decrease in demand, the good is

A

Inferior

73
Q

Which of the following will occur if consumers expect the price of a food to fall in the coming months

A

Demanda will decrease today

74
Q

Which of the following will increase in demand for disposable diapers

A

A new baby boom

75
Q

Quantity supplied

A

The actual amount of a good or service people are willing to sell at some specific price

76
Q

Supply schedule

A

Shows how much of a good/service producers would supply at different prices

77
Q

Supply curve

A

Shows the relationship between the quantity supplied and the price

78
Q

Law of Supply

A

The price and quantity supplied of a goos are positively related

79
Q

Change in supply

A

A shift of the supply curve, which changes the quantity supplied at any given price

80
Q

Movement along the supply curve

A

A change in the quantity supplied of a good arising from a change in the good’s price

81
Q

5 factors for changes in supply curve

A
  • changes in input prices
  • Changes in the prices of related goods
  • Changes in technology
  • Changes in expectation
  • changes in numbers and producers
82
Q

Individual Supply Curve

A

The relationship between the quantity supplied and the Process for an individual producer

83
Q

Market Supply Curve

A

Shows how the combined total quantity supplied by all individual producers in the market depends on the market price of that good

84
Q

Which will decrease the supply of rice?

A

Wage of workers producing rice increases

85
Q

An increase in the demand fo steak, which increases the price of steak in lead to an increases in which of the following

A

The supply of leather- a complement in production

86
Q

A technological advance in textbook production will lead to which of the following?

A

Increase in textbook supply

87
Q

Equilibrium

A

Economic situation in which no individual would be better off doing anything different

88
Q

Equilibrium Price

A

The price that matches the quantity supplied and the quantity demanded

89
Q

Equilibrium Quantity

A

The Quantity bought and sold at that price

90
Q

Market clearing price (equilibrium price)

A

The price that “clears the market” by ensuring that every buyer willing to pay that price finds a seller willing to sell at that price

91
Q

Market price

A

Well-established ongoing market all selles recieve and all buyers pay about the same price

92
Q

Surplus

A

Excess supply- good exceed quantity demanded

93
Q

Shortage

A

Quantity demanded exceed the quantity supplied

94
Q

Simultaneous shifts of supply and demand curves

A
  • when demand increases and supply decreases the ep. rises but the change in equilibrium quantity is ambiguous
  • when demand decreases and supply increases, equilibrium price falls but the change in the equilibrium quantity is ambiguous
  • both demanded and supply increase the equilibrium quantity buy price is ambiguous
  • both demanded and supply decrease the equilibrium quantity buy price is ambiguous
95
Q

What will happen in the market for tomatoes if there is a salmonella outbreak?

A

Supply and demand will both decrease

96
Q

What would lead to an increase in the equilibrium price of product x

A

Increase in price of machinery used to make product x

97
Q

The equilibrium price will rise but the equilibrium quantity may increase, decrease, or stay the same if…

A

Demand increases and supply decreases

98
Q

An increase in # of buyers and a technological audience will cause…

A

Demand to increase and supply to increase

99
Q

What is true if demand and supply increase at the same time?

A

The equilibrium quantity will increase.

100
Q

Productive efficiency

A

Product being produced in the least costly way

- any point on ppc

101
Q

Allocative efficiency

A

The products being produced are the ones more desired by society
- optimal point on the ppc

102
Q

Per unit opportunity cost =

A

Opportunity cost/units granted

103
Q

Law of Increasing Opportunity cost

A

As you produce more of any good, the opportunity cost will increase

104
Q

Incentives

A

Rewards or punishments for choices are key in a free market

105
Q

4 factors of production

A
  • land
  • labor
  • capital
  • entrepreneurship
106
Q

Trade-offs

A

All the alternatives that we give up whenever we choose one course of action over others y

107
Q

Marginal

A

1 more

108
Q

Aggregate means…

A

Total

109
Q

Aggregate output

A

Total production of goods and services for a given time period

110
Q

Ceteris paribus

A

All other things equal

111
Q

Demand

A

The amount of a good o service that someone is willing and able to buy

112
Q

Quantity demanded

A

The amount of good or service that someone is willing or able to buy at a given prove and a specific time

113
Q

Law of demand

A

An increase in price will cause a decrease in the quantity demanded

114
Q

Income effect

A

A change in price will cause a change in the purchasing power.

115
Q

Substitution effect

A

If a product becomes more expensive people will choose a cheaper substitute

116
Q

utility

A

Describes the usefulness of a product

117
Q

Diminishing marginal utility

A

As more products are consumed the satisfaction from each new reduction declines

118
Q

Supply

A

The different quantities of a good that sellers are willing and bel to sell at different prices

119
Q

Law of Supply

A

There is a direct relationship between price and quantity supplied