unit 3: MICROECONOMICS Flashcards
EFF1
How many main ideas are there in unit 3?
In my opinion, there are 3 main ideas:
+Firstly, it talks about the definition of microeconomics.
+Secondly, it talks about the limits faced by consumers, firms, and workers.
+Finally, it mentions 3 important themes in microeconomics:
- How to make optimal trade-offs
- the roles of price
- the central role of markets.
what is the definition of microeconomics?
Microeconomics is a branch of economics that deals with how consumers and firms behave while making decisions on the allocation of scarce resources.
What does the term “scarcity” mean?
It is the state in short supply.
we have UNLIMITED WANTS but LIMITED RESOURCES.
what does the term “trade-offs” mean?
trade-offs are ALL the alternatives that we give up when we make a choice.
what does the term opportunity cost mean?
THE MOST DESIREABLE alternative that we give up when we make a choice.
In a PLANNED ECONOMY, who makes decisions on the allocation of scarce resources?
The government.
Why are many MICROECONOMIC TOOLS AND CONCEPTS OF LIMITED relevance in Cuba and North Korea?
because in a planned economy such as Cuba and North Korea:
- the government makes most of the allocation decisions
- and the planned economy’s AGENTS have LITTLE FLEXIBILITY in their CHOICES.
What are the limits faced by consumers, firms, and workers?
They are:
- The limited income faced by consumers.
- The limited budgets and technical know-how faced by firms.
- The limited number of hours in a week faced by workers.
Why do consumers trade-off?
Because consumers face limited income.
Why do workers trade-off?
Because they face a limited number of hours in a week.
Why do firms trade-off?
Because Firms face limited budget and technical know-how.
How many IMPORTANT THEMES of microeconomics are there?
There are 3 important themes:
- how to make OPTIMAL TRADE-OFFS.
- The role of PRICES
- The central role of markets.
What can you learn from the consumer theory?
consumer theory describes
how consumers, based on their preferences, maximize their well-being by
- TRADING OFF the purchase of more of some goods WITH the purchase of less of others
- and trading off current consumption with future consumption.
Give some examples that explain the trade-offs made by consumers. or what are trade-offs made by consumers?
consumers based on their preferences:
- trade-off the purchase of more of some goods with the purchase of less of others.
- and trade-off current consumption with future consumption
Give some examples explaining the trade-offs made by workers? or what are trade-offs made by workers?
Workers trade-off:
- working now with continued education: they must decide whether and when to enter the workforce.
- working for a large corporation or working for a small company: they must make decisions on the choice of employment
- labor for leisure: they must decide how many hours per week they wish to work.
Nói những ý in đậm là được rồi nhưng nếu bạn thích có thể nêu hết^^
Can you give some examples of the role of prices in trade-off made by consumers?
For example, A consumer trades off beef for chicken BASED PARTLY ON HIS PREFERENCES for each one, but ALSO ON THEIR PRICES.
Can you give some examples of the role of prices in trade-off made by workers?
Workers trade-off LABOR for LEISURE based in part on the “price” that they can get for their labor like the wage.
Can you give some examples of the role of prices in trade-off made by firms?
Firms trade-off hiring more workers with purchasing more machines based IN PART on wage rates and machine prices.
Who allocates scarce resources?
- in a planned economy: government allocates mostly resources.
- in a modern market economy: consumers, workers, and firms can do that.
