whole shabang Flashcards
need
human survival
want
improves standard of living
factors of production
countrys economic resources, Capital land labour enterprise
basic economic problem
scarce resources, unlimited wants
PPF
maximum output combinations of two goods
economic growth
increase in productive capacity in time
utility
satisfaction or benefit from consumptiom
rational consumer
maximise utility/satisfaction
marginal utility
utility gained from additional consumption
diminishing marginal utility
consume more, gain less for each unit
asymmetric information
one agent knows more than the other, giving them power in the transaction
bounded rationality
try to be rational but cant due to imperfect information
bounded self-control
have good intentions but lack self discipline
rules of thumb
shortcuts in thinking
anchoring
rely on particular pieces of information when making decisions
availability bias
make judgements on probability from recent events
social norms
influence of others on decisions
altruism and fairness
motivated to do the right thing
choice architecture
how choices are presented
framing
how information is worded
nudges
gentle suggestions influence decisions
default choice
people choose default options
market
buyers and sellers engage in trade
competitive market
large no. of buyers and sellers with abundant information
equilibrium price
demand=supply
effective demand
the desire for good with the ability to pay
substitute
the alternative to another good
complement
consumed together with another good
price elasticity of demand
response of %change in demand to a %change in price
income elasticity of demand
response of %change in demand to a %change in income
cross elasticity of demand
response of %change in demand A to a %change in price B
supply
quantity of goods and services firms are willing and able to sell at a given price
price elasticity of supply
response of %change in supply to a %change in price
market disequilibrium
quantity demanded does not equal supply
