VWL Flashcards
Capital
Things that are used in the production of goods and services (money, workforce..)
Factors of production
Inputs into the process of production
Production
Process of transforming resources into goods & services
Input / Resources
Something provided by nature that is used to satiafy human wants
Opportunity Cost
Best alternative to give up
Output
Final or intermediate product
Absolute advantage
If he produces the same good using less resources
Comparative advantage
If he produces the good at lower opportunity cost
Production Possibility Frontier
Graph that shows all goods and services that can be produced if all societys ressources are used
Actors of a closed laissez fair economy
Entrepeneur (make business)
Households (consuming)
Markets of a closed laissez faire economy
Product/Output Market (Exchange of products)
Input market (Ressource exchange)
Markets
Labour market
capital market
land market
goods and services market
Quantity demanded depends on:
Price of product Income of Household accumulated wealth of household prices of other products taste and preferences expectations about future
Law of demand
Substitution effect (buying more expensive goods intstead of cheaper ones)
Income effect (Less income = less consumption)
Demand Normal goods
Demand rises/falls when income inc./decr.
Demand inferior goods
Demand falls when increase in income
Giffen good
Price rises -> demand rises
Substitute
Replacement goods when the price of another good increases
Perfect substitute
Identical product
Complementary goods
Goods that go together
Quantity Supplied
The amount of a product that a firm would be willing and able to offer for sale at a particular price at a certain time
Law of supply
Price increase -> more supply
Price increase -> less supply
Equilibrium Supply/Demand
When quantity demanded = quantity supplied
Then no tendence for a price change
Excess demand/shortage
Quantity demanded > Quantity supplied
Excess supply/surplus
Quatity supplied > Quantity demanded
Price rationing
Describes how quantity supplied effects the price
Price ceiling
Government decides a maximum limit of a product
Price floors
Do not get a good become to cheap -> labor
Consumer surplus
Difference between max value a consumer would pay for a good and its current price
Producer surplus
Difference of current market price and production rest of a product
Deadweight loss
Lost consumer and producer surplus that would occure in an efficient market
Elasticity
The ratio of the percentage change in one variable to the percentage change in another variable
Price elasticity of demand
The ratio of thr percentage of change in quantity demanded to the percentage of change in price
Utility
The satisfaction a product brings relatively to alternative product -> bais of choice
Marginal utility
Addition satisfaction by one more product unit
Total utility
Total satisfaction by a product
Law of diminishing marginal utility
The more you consume of one good the less satisfaction it will generate
Profit
Total revenue (Quantity * price) - Total cost
Short run
Period of time in which firms can neither enter or exit an industry and the firm is operatingunder a fixed scale
Long run
Period of time within no fixed factors of production. They can enter exit markets and increase/decrease scale of operations
Marginal product
Additional output by adding one more specific input unit
Law diminishing returns
je mehr sich marginal product erhöht, desto geringer wird steigung
Total cost
Fixed + variable cost
Average fixed cost (AFC)
Total fixed cost / quantity of output
Marginal cost
Increase in total variable cost by producing one more unit of a good
Average variable cost (AVC)
TVC / quantity output