All terms Flashcards
(104 cards)
1
Q
The study of choices that individuals make given the presence of scarcity
A
Economics
2
Q
limited resources but unlimited wants
A
Scarcity
3
Q
Factors of Production
A
Labour, Land, Capital, Entrepreneurship
4
Q
Man made means of production
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Capital
5
Q
Natural resources and resources which can be extracted and cultivated from natural resources
A
Land
6
Q
Mental and physical human input into the production process
A
Labour
7
Q
the activity of combining other factors to make a profit
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Entrepreneurship
8
Q
Whenever you say yes you also ….
A
Say no to something
9
Q
Scarcity forces us to _________ ________ and Necessitates _________
A
Make Choices, rationing
10
Q
The three choices scarcity forces
A
What to produce, How to Produce, for whom to produce
11
Q
The ____ will determine the answers to what, how, and for whom/
A
economy
12
Q
All the choices given up
A
Trade-Off
13
Q
Most valuable choice given up
A
Opportunity Cost
14
Q
Costs that have been incurred that cannot be recovered, and are independent of future costs
A
Sunk Costs
15
Q
Rational people weigh _____ and _____
A
Costs and benefits
16
Q
Decision makers choose ________
A
Purposefully
17
Q
What does economize mean?
A
Maximize the benefit and minimize the cost
18
Q
If one person is rationale is the other person irrational?
A
No, both can rationally make a choice
19
Q
If marginal benefit is greater than marginal cost
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Do it
20
Q
How do you get people to act in a certain way?
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Incentives
21
Q
Reward people financially for making certain choices or behaving a way or coupons/sales are examples of
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Positive incentives
22
Q
Punish people financially for making certain choices and behaving in certain ways are examples of (can also discourage people from smoking etc)
A
Negative incentives
23
Q
Social and historical forces and cultural norms that influence market outcomes
A
Invisible handshake
24
Q
Goal of economics
A
Allocate resources to where they are valued most
25
What does trade create?
value
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______ allow resources to move where they are value most
Markets
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Price is considered a
Allocating method
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Often times, the goal of the firm is to maximize _________
Profit
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Good intentions do not always lead to _________ outcomes
desirable
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What does government due when undesirable outcomes occur?
Regulation, Price controls, taxes and subsidies
31
who are your rivals?
Are you competing against "the market"?
Do you have identifiable rivals?
If you have identifiable rivals, how close are they?
Do you have to consider your rivals possible reactions when deciding what the best course of action is?
All these questions are examples of __________ ________
identifying competitors
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when buyers and sellers come together and exchange goods and services
a market
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How are prices determined?
By supply and demand
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theory of consumer behavior
demand
35
theory of producer behavior
supply
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_________ in a market exists when everyone who wants to buy the product at the market price can do so and when everyone who wants to sell the product at the market price can do so.
equilibrium
37
The three dimensions of marketing
Geography
Product characteristics
Timing
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Market definition depends on _________ and can get subjective (for example branding)
Questions being asked
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Supply and demand quantities refer to quantities per period of ______
time
40
Homogenous
products are seen as identical or nearly identical in eyes of consumer
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Have many buyers and sellers, homogenous products, and market shares have no influence on prices. Resources are perfectly mobile, and firms can enter or exit market with zero cost.
competitive markets
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All firms are ______ _________ in a competitive market
price takers
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The amount of good that household want to consume given their income and prices in a given time period. Also the amount of good consumers are willing and able to consume.
Quantity demanded
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what is market demand
Sum of all individual demands and each particular price points
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When price goes up...
demand goes down and vice versa
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The relationship between price and quantity is
inverse
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Changes in Quantity demanded is associated only with
movement due to the change in price (demand curve does not move)
48
Changes in demand is associated with the term
Shift (either left or right) at every price point
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What does a right shift mean?
increase in demand
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What does a left shift mean
A decrease in demand
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Movement along the demand curve is
same as a change in quantity demanded
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decrease in income lead to buying of more ________ goods
inferior
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Two aspects of related goods
substitution (for example coke versus Pepsi vs special K) and complementary (the demand of the complementary good increases, price decreases)
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if substitution price goes up, demand of the current good goes
down
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in the terms of rent, if more people do not want to transport to the city, how would the price be affected?
it would shift right with an increase in demand as well, but a decrease in supply
56
Supply
amount of quantity available to be sold at a specific price
57
As price increases, supply quantity
increases (positively related)
58
What does movement mean in the supply curve
change in quantity supplied
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Increase in supply leads to a
right shift
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Increase in price leads to
increase in quantity supplied
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Inputs (such as individual components to produce the product) price decreases, production cost decreases and supply will
increase (causes a shift)
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What can cause shifts in supply price?
Number of sellers, technology, and inputs
63
there are also complements
Such as bourbon barrels for beer
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There are also _______ in production
substitutes
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What can also effect supply?
Taxes and subsidies, complements, and substitutes
65
When quantity supply = quantity demanded
Equilibrium quantity (where the curves intersect)
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When quantity supplied is more than quantity demanded
Surplus
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quantity demanded is greater than quantity supplied
shortage
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The effect of change in price on the quantity of demand
Price elasticity of demand (slope of the line, higher slope is relatively inelastic)
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$ change in quantity demanded/ % change in price
Price elasticity of demand (PED)
70
|Ed |>1
Demand is elastic (big changes)
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|Ed |<1
demand is inelastic (small changes
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|Ed| = 1
demand is unitary elastic |%Q|=|%P|
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The responsiveness of the quantity demanded of a good or service to a change in income (Change in % in quant demanded/ change in % income)
Income elasticity of demand (YED)
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YED <0
inferior good
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1> YED >0
normal good
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YED>1
luxury good
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the responsiveness of the quantity demanded of a good or service to a change in the price of another good or service
Cross elasticity of demand (XED) (Change % of quant good D/ Change % quant good A)
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Negative XED
Goods are complements
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In price elastic, when price goes up
revenue goes down (and vice versa)
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In price inelastic, when price goes up
revenue goes up (and vice versa)
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In price elastic, total revenue move in direction of ________
quantity
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What do these describe:
Remain the same in the short period
At any level of output, the amount remains the same
Buildings, land etc
Fixed inputs
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Fixed costs are the costs that are related to
fixed inputs
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In the long run, what do fixed inputs turn into
variable inputs
85
What do these describe:
in the long run, all factors of production vary according to the volume of output
Raw materials, labour
Variable inputs
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Variable inputs are associated with what cost
variable cost
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Maximum level of output that can be produced with a given amount of inputs
Total product
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A measure of the output produced per unit of input
Average Product = Q/L (for labor) ... Q/K (for capital)
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Measure of the output produced per unit of input
Marginal product, MP = Delta Q/ Delta L (labour).... MP = Delta Q/ Delta K (capital)
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Three stages of return
Increasing marginal returns, decreasing marginal returns, negative marginal returns
(on total product quantity of labor plot)
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Value marginal product
Price* marginal product, employ labor until VMP = wage (maximize profit)
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One factor of production is fixed
Short Run
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Both labour and capital are variable
long run
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when all factors of production are variable, including technology / regulation
Very Long run
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When ATC falls as Q increases
Economies of scale
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ATC stays the same as Q increases
Constant rturns to scale
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ATC rises as Q increases
Diseconomies of scale
98
The horizontal boundaries identify the ___________ and _________ of products a firm produces
Quantity and variety
99
Defines how much of the total product market the firm serves
Scale
100
Defines the variety of related products the firm offers
Scope
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these boundaries identify the relationship between up and downstream producers
vertical boundaries
102
reasons for diseconomies of scale
Becomes too big and complex (inefficient), more opportunities for shirking, more costly to do monitoring, loss of team spirit or morale
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