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ECON200 > 1ST EXAM TERMS > Flashcards

1ST EXAM TERMS Flashcards

highlighted words

1
Q

economics

A

study of how people manage resources

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2
Q

microeconomics

A

study of how individuals and firms manage resources

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3
Q

macroeconomics

A

study of the economy as a whole, and how policy-makers manage the growth and behavior of the overall economy

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4
Q

rational behavior

A

making choices to achieve goals in the most effective way possible

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5
Q

scarcity

A

the condition of wanting more than we can get with available resources

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6
Q

opportunity cost

A

the value to you of what you have to give up in order to get something; the value you could have gained by choosing the next-best alternative

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7
Q

marginal decision making

A

comparison of additional benefits of a choice against the additional costs it would bring, without considering related benefits and costs of past choices

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8
Q

sunk cost

A

a cost that has already been incurred and cannot be recovered or refunded

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9
Q

positive incentive

A

makes people more likely to do something

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10
Q

negative incentive

A

makes people less likely to do something

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11
Q

efficiency

A

use of resources to ensure that people get what they most want and need given the available resources

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12
Q

correlation

A

a consistently observed relationship between two variables

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13
Q

causation

A

a relationship between two events in which one brings about the other

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14
Q

circular flow model

A

a simplified representation of how the economy’s transactions work together

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15
Q

positive statement

A

a factual claim about how the world actually works

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16
Q

normative statement

A

a claim about how the world should be

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17
Q

market economy

A

an economy in which private individuals, rather than a centralized planning authority, make the decisions

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18
Q

market

A

buyers and sellers who trade a particular good or service

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19
Q

competitive market

A

a market in which fully informed, price-taking buyers and sellers easily trade a standardized good or service

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20
Q

price taker

A

a buyer or seller who cannot affect the market price. In a perfectly competitive market, firms are price takers as a consequence of many sellers selling standardized goods

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21
Q

standardized good

A

a good for which any two units have the same features and are interchangeable

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22
Q

transaction costs

A

the costs incurred by buyer and seller in agreeing to and executing a sale of goods or services

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23
Q

quantity demanded

A

the amount of a particular good that buyers will purchase at a given price during a specified period

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24
Q

demand

A

describes how much of something people are willing and able to buy under certain circumstances

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25
Q

law of demand

A

a fundamental characteristic of demand that states that, all else equal, quantity demanded rises as price falls

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26
Q

demand curve

A

a graph that shows the quantities of a particular good or service that consumers will demand at various prices

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27
Q

nonprice determinants of demand

A

consumer preferences, prices of related goods, income of consumers, expectations of future prices, number of buyers in the market

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28
Q

substitutes

A

goods that serve a similar-enough purpose that a consumer might purchase one in place of the other

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29
Q

complements

A

goods that are consumed together, so that purchasing one will make consumers more likely to purchase the other

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30
Q

normal goods

A

goods for which demand increases as income increases

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31
Q

inferior goods

A

goods for which demand decreases as income increases

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32
Q

shift in the demand curve

A

a change in nonprice determinant causes an increase/decrease in demand

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33
Q

movement along the demand curve

A

a change in price causes an increase/decrease in quantity demanded

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34
Q

quantity supplied

A

the amount of a particular good or service that producers will offer for sale at a given price during a specified period

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35
Q

supply

A

how much of a good or service producers will offer for sale under given circumstances

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36
Q

law of supply

A

a fundamental characteristic of supply that states that, all else equal, quantity supplied rises as price rises

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37
Q

supply curve

A

a graph that shows the quantities of a particular good or service that producers will supply at various prices

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38
Q

nonprice determinants of supply

A

prices of related goods, technology, prices of inputs, expectations, number of sellers

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39
Q

shift of the supply curve

A

change in nonprice determinant causes an increase/decrease in supply

40
Q

movement along the supply curve

A

change in price causes an increase/decrease in quantity supplied

41
Q

equilibrium

A

the situation in a market when the quantity supplied equals the quantity demanded; graphically, this convergence happens where the demand curve intersects the supply curve

41
Q
A
42
Q

equilibrium price

A

the price at which the quantity supplied equals the quantity demanded

43
Q

equilibrium quantity

A

the quantity that is supplied and demanded at the equilibrium price

44
Q

surplus

A

a situation in which the quantity of a good that is supplied is higher than the quantity demanded; difference between the price at which a buyer or seller would be willing to trade and the actual price

45
Q

shortage

A

a situation in which the quantity of a good that is demanded is higher than the quantity supplied

46
Q

elasticity

A

a measure of how much consumers and producers will respond to a change in market conditions

47
Q

cross-price elasticity of demand

A

describes how much the demand curve shifts when the price of another good changes; % change in quantity of A demanded/% change in price of B

48
Q

income elasticity of demand

A

measures how much the demand curve shifts when consumers’ incomes change; % change in quantity demanded/% change in income

49
Q

price elasticity of demand

A

the size of the change in the quantity demanded of a good or service when its price changes; % change in Q demanded/% change in P

50
Q

more elastic

A

a small change in price causes a large change in the quantity demanded

51
Q

more inelastic

A

consumers will buy approximately the same quantity, regardless of the price

52
Q

determinants of price elasticity of demand

A

availability of substitutes, degree of necessity, cost relative to income, adjustment time, scope of the market

53
Q

perfectly elastic demand

A

demand for which any increase in price will cause quantity demanded to drop to zero; represented by a perfectly horizontal line

54
Q

perfectly inelastic demand

A

demand for which quantity demanded remains the same regardless of price; represented by a perfectly vertical line

55
Q

elastic

A

demand that has an absolute value of elasticity greater than 1

56
Q

inelastic

A

demand that has an absolute value of elasticity less than 1

57
Q

unit-elastic

A

demand that has an absolute value of elasticity exactly equal to 1

58
Q

quantity effect

A

a decrease in total revenue that results from selling fewer units of the good; when the quantity effect outweighs the price effect, a price increase will cause a drop in total revenue

59
Q

price effect

A

an increase in total revenue that results from receiving a higher price for each unit sold; when price effect outweighs the quantity effect, a price increase will raise total revenue

60
Q

price elasticity of supply

A

the size of the change in the quantity supplied of a good or service when its price changes; % change in quantity supplied/% change in price

61
Q

determinants of price elasticity of supply

A

availability of inputs, flexibility of the production process, adjustment time

62
Q

willingness to pay

A

the maximum price that a buyer would be willing to pay for a good or service

63
Q

willingness to sell

A

the minimum price that a seller is willing to accept in exchange for a good or service

64
Q

consumer surplus

A

the net benefit that a consumer receives from purchasing a good or service, measured by the difference between willingness to pay and the actual price

65
Q

producer surplus

A

the net benefit that a producer receives from the sale of a good or service, measured by the difference between the producer’s willingness to sell and the actual price

66
Q

total surplus

A

a measure of the combined benefits that everyone receives from participating in an exchange of goods or services

67
Q

zero-sum game

A

a situation in which whenever one person gains, another loses an equal amount, such that the net value of any transaction is zero

68
Q

efficient market

A

an arrangement such that no exchange can make anyone better off without someone becoming worse off

69
Q

deadweight loss

A

a loss of total surplus that occurs because the quantity of a good that is bought and sold is below the market equilibrium quantity

70
Q

reasons why government intervenes

A

changing the distribution of surplus, encouraging or discouraging consumption, correcting market failures

71
Q

price control

A

a regulation that sets a maximum or minimum legal price for a particular good

71
Q

price ceiling

A

a maximum legal price at which a good can be sold

72
Q

price floor

A

a minimum legal price at which a good can be sold

73
Q

does a tax on sellers affect supply?

A

yes, supply decreases

74
Q

does a tax on sellers affect demand?

A

no, demand stays the same

75
Q

how does a tax on sellers affect the market equilibrium?

A

the equilibrium price rises and quantity demanded falls

76
Q

tax wedge

A

the difference between the price paid by buyers and the price received by sellers in the presence of a tax

77
Q

does a tax on buyers affect the supply curve?

A

no, supply stays the same

78
Q

does a tax on buyers affect the demand curve?

A

yes, demand decreases

79
Q

how does a tax on buyers affect the market equilibrium?

A

the equilibrium price and quantity both fall

80
Q

tax incidence

A

the relative tax burden borne by buyers and sellers

81
Q

subsidy

A

a requirement that the government pay an extra amount to producers or consumers of a good

82
Q

does a subsidy to sellers affect the supply curve?

A

yes, supply increases

83
Q

does a subsidy to sellers affect the demand curve?

A

no, demand stays the same

84
Q

how does a subsidy to sellers affect the market equilibrium?

A

the equilibrium price decreases and the equilibrium quantity increases

85
Q

effects of a subsidy

A

equilibrium quantity increases, buyers pay less and sellers receive more for each unit sold, the government has to pay for the subsidy

86
Q

game theory

A

the study of how people behave strategically under different circumstances

87
Q

behaving strategically

A

acting to achieve a goal by anticipating the interplay between your own and others’ decisions

88
Q

prisoners’ dilemma

A

a game of strategy in which two people make rational choices that lead to a less-than-ideal result for both

89
Q

dominant strategy

A

a strategy that is the best one for a player to follow no matter what strategy other players choose

90
Q

nash equilbrium

A

an equilibrium reached when all players choose the best strategy they can, given the choices of all other players

91
Q

commitment strategy

A

an agreement to submit to a penalty in the future for defecting from a given strategy

92
Q

repeated game

A

a game that is played more than once

93
Q

tit-for-tat

A

a strategy in which a player in a repeated game takes the same action that his or her opponent did in the preceding round

94
Q

backward induction

A

the process of analyzing a problem in reverse, starting with the last choice, then the second-to-last choice, and so on, to determine the optimal strategy

95
Q

first-mover advantage

A

benefit enjoyed by the player who chooses first and, as a result, gets a higher payoff than those who follow

ECON200 (3 decks)

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