Econ Main Points

Question 0

Normative economics

Answer 0

Value judgement based on how economic life should or ought to be

Question 1

Economics

Answer 1

A behavioral science concerned with the way scarce resources are allocated to satisfy human wants

Question 2

Positive economics

Answer 2

Observation or explanation of economic life as it is in fact

Question 3

Ceteris paribus

Answer 3

All other things held equal or constant

*useful as an analytical tool to focus on only the impacts of the variable of interest

Question 4

Real vs nominal

Answer 4

% vs numbers

Question 5

Margin

Answer 5

The difference between an existing situation and a proposed (usually small) change

Question 6

Marginal cost (MC)

Answer 6

The additional cost generated by producing one more unit of output

Question 7

Marginal revenue (MR)

Answer 7

The additional revenue that will be generated by selling one more unit of output

Question 8

Marginal product of labor (MPl)

Answer 8

The additional output generated by employing/using one more unit of labor

Question 9

Demand curve

Answer 9

Slope downward
Inverse relation
Y=mx+b
M-always negative (law of demand)
B- the lowest price where the Qd=0

Question 10

Competition

Answer 10

The effort of two of two or more parties acting independently to secure the business of a third party by offering the most favorable terms

Question 11

Market equilibrium

Answer 11

Consumer surplus and producer surplus
Supply and demand curves meet
Market clears where they meet

Question 12

Fundamental theorem of exchange

Answer 12

Gains thru trade

Question 13

A. Smith’s Invisible Hand

Answer 13

Each individual is motivated toward their own end while the wants of society, in general, are met

Question 14

Price ________ demanders, ________ suppliers

Answer 14

Rations, motivates

Question 15

Consumer surplus (CS)

Answer 15

The difference between what a consumer is willing and able to pay for a good or service and what they actually pay

Question 16

Producer surplus (PS)

Answer 16

The difference between what the producer is willing and able to receive for a good or service and what they actually receive

Question 17

Property rights

Answer 17

Rules that govern and establish ownership and control of resources in an economy

Question 18

Determinants in the validity of a property right

Answer 18

Definition
Enforcement
Transferability

Question 19

Prof mansfield: 3 ways a system of property rights evolve in an economy

Answer 19

Tradition
Command (control)
Market

Question 20

Price elasticity of demand (Ed)

Answer 20

• Change Qd/Qd/change P/P

Question 21

Liquidity

Answer 21

The ease with which an asset may be converted into the economies medium of exchange, cet par

Question 22

Business cycle

Answer 22

The rise and fall of business activity relative to the long term trend line

Question 23

Competitive market characteristics

Answer 23

Many buyers and sellers
Perfect information
Homogenous products
Free entry and exit
Atomistic trade