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Geog 454 > Week 3 > Flashcards

Week 3 Flashcards

1
Q

describe traditional economic systems

A

resource allocation determined by “what was before”

children follow the same jobs their parents had

wealth distribution linked to social status

pre-modern

EX. caste systems, Amish, indigenous populations

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2
Q

desceibe a command economic system

A

a central board in power that determines the allocation of people and resources

central or planned economy

direction of growth is determined by the authorities

ex. USSR, communist China

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3
Q

describe market economic systems

A

production and consumption are dispersed

price and profit govern distribution of wealth

production depends on consumer demand

supply/demand relationship

“invisible hand”

ex. Canada, USA

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4
Q

describe mixed economic systems

A

government intervention versus free market forces

combinations

varying proportion

ex. most of contemporary world

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5
Q

what is supply

A

available products, production, manufacturing, amount willing to produce

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6
Q

what is aggregated supply

A

sum of individual supplies

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7
Q

list the determinants of supply

A

cost of resources

technology

taxes, subsidies

price of other goods

expectations

labour

time

MARKET PRICE

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8
Q

what is demand

A

how much consumers are willing and able to pay for a product

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9
Q

what is aggregated demand

A

sum of individual demands

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10
Q

list the determinants of demand

A

tastes

income

prices of other goods

expectations

number of buyers

MARKET PRICE

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11
Q

describe the graph function for supply and demand

A

supply graph = positive function

demand graph - negative function

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12
Q

define market equilibrium

A

an optimal price ad quantity
assumption that people will always act rationally (which is not accurate)
where the demand curve and supply curve intersect

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13
Q

describe what happens if the price is above the equilibrium

below equilibrium?

A

above = price too high which leads to a surplus

below = price to low which leads to a shortage

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14
Q

describe market equilibirum in market economic systems

A

changes in demand/supply are represented by a different curve and drive to a different equilibrium

challenged by recent events

consider economic theory

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15
Q

decribe market equilibrium in command economic systems

A

price and quantity are decided by authorities

shortages are measured by line-ups outside stores

excess is measured by the stock in warehouses

specialized branch of economic theory

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16
Q

list the 4 types of markets

A

pure competition

monopolistic competition

oligopoly

pure monopoly

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17
Q

describe supply side pure competition

A

very large number of firms producing a product

new firms can easily enter the market

ex. corn, wheat

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18
Q

describe supply side pure monopoly

A

one firm is the sole seller of a product or service

entry of other firms is blocked or controlled

ex. oil, post stamps

19
Q

describe supply side monopolistic competition

A

relatively large number of sellers

competition based on differentiation, promotion

competition is easy

ex. clothes

20
Q

describe supply side oligopoly

A

few sellers

pricing and output decisions are interdependent

product may be standardized or differentiated

ex. OPEC

21
Q

what are the factors of production

A

traditionally the factors are capital and labour

capital = (K)
labour = (L)

production function = Q = f(K,L)

22
Q

describe factor substitution

A

same output can be yielded with another combination of production factors

factor subsitution has very important economic and social consequences
ex. jobs

23
Q

law of diminishing return

A

as the use of an input increases (with other inputs fixed), at some point additions to the input will result in decreasing increases of output

24
Q

Isoquant

A

all combination of two or more production factors

curve of equal quantity

banana like graph

25
Q

Isocost

A

line that shows all the combinations of inputs that can be bought

straight line graph

26
Q

list the production costs (6)

A

fixed cost - not linked to production

variable cost - varies with output levels

implicit cost - somewhat “hidden” costs, opportunity costs (taxes)

total cost - sum of all fixed and variable costs

average cost - total cost divided by # of output units

marginal cost - increase in cost when you produce an additional unit

27
Q

short run

A

a period of time in which at least one input is fixed
ex. machinery

28
Q

long run

A

a period of time over which all production factors are variable

changes to output level
factor substitution

29
Q

rational behaviour and outcomes

A

firm choses options to just cover its production costs

lower output levels allows other firms to enter market

higher output levels would alter equilibirum prices

30
Q

describe profit

A

profit is the surplus earned by a firm above the normal return on capital

excess of total revenue over the opportunity cost

a firm earning zero profits is earning a normal or competitive return

31
Q

what are economies of scale

A

as the plant size increases, average production costs tend to decrease

classical factors: labour specialization, manageria specialization, capital efficiency

32
Q

what are diseconomies of scale

A

may arise from inefficiences in controlling and coordinating operations of a large firm

33
Q

what is price elasticity

A

responsiveness to a change in price

34
Q

explain low elasticity

A

not very responsivness to changes in price

ex. neceassry items, waster, gas

35
Q

explain high elasticity

A

highly responsive to changes in prices

ex. non-esssential items

36
Q

what is cross elasticity

A

elasticity of one good can relate/impact another good

37
Q

what are subsitute goods

A

tea price goes up, coffee demand also goes up

38
Q

what are complimentary goods

A

high gas = lower demand for cars

39
Q

what is positive elasticity

A

normal or superior goods
the higher the income the higher the demand for superior goods

40
Q

what is negative elasticity

A

inferior goods
the lower the income the higher the demand for inferior goods

41
Q

luxury goods

A

contradicts the law of demand

higher the price = higher the demand

42
Q

Veblen law of goods

A

critique of capitalism

sociological analysis of consumer behaviour

43
Q

what is utility maximization/

A

consumers do and can achieve an optimal mix of goods and an optimal allocation of their income based on

budget constraints
avaliable product, tastes, and information

Geog 454 (8 decks)

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