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Flashcards in Chapter 1 Deck (22):
1

Economics

the discipline that studies how efficient decisions are made

2

Efficient Decisions

involve choosing the most valuable alternative

3

Theory of Revealed Preference

Our choices reveal our values

4

Characteristics of Value

-value depends on the situation
-value is different for different people
-subsequent units of the same good have less value

5

Optimal Arrangement Principle

the idea that we first choose the best, then the second best, and so on...

6

Value of Something to An Individual

the most an individual is willing to sacrifice to obtain that something

7

Money/Dollars

The only reason we value dollars is because of the stuff we exchange them for

8

Cost

the value of the BEST alternative which is sacrificed when a decision is made

9

No Free Lunch

since any decision has at least two alternatives, any decision involves costs. Nothing is really free

10

Macroeconomics

study of entire economies, using concepts like total output, the unemployment rate, national debt, total investments and is so large its sometimes easier to hide the fact there are costs

11

Marginal Value

value of the individual units of that something

12

Marginal Analysis

we consume each unit for which the marginal value is at least as great as marginal cost

13

Law of Diminishing Returns

as we add workers to a production facility, eventually they become less productive b/c there is no way for everyone to take part in the production process

14

Demand

relationship between the possible prices of something and the quantities people are willing to buy, other things equal

15

Supply

the relationship between the possible prices of something and the quantities people/firms are willing and able to sell, other things equal

16

Equilibrium Price

consumers can buy all they want, at the same time firms can sell all they want

17

Social Gain

Total Value-Total Cost=Social Gain

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Consumer Gain

Total Value-Total Amount Paid=Consumer Gain

19

Producer Gain

Total Amount Paid-Total Cost=Producer Gain

20

Economic Problem

allocating scarce resources to their best uses

21

Changes in Supply

shifts in the supply curve. Caused by changes in producers costs

22

Changes in Demand

shifts in demand curve. Caused by changes in the things that influence the consumers willingness to purchase the product which have nothing to do with the product price