Econ Test #1

Question 1

increase in income leads to less of one product

Answer 1

inferior good

Question 2

important to include for “if then statements” when applicable

Answer 2

substitubes vs compliments or inferior vs. normal

Question 3

What is a point that is below ppf

Answer 3

innefficient use of resources

Question 4

What is a point above ppf

Answer 4

infeasible

Question 5

what is a point on ppf

Answer 5

efficient points

Question 6

what happens when ppf moves on one axis

Answer 6

sectoral shift

Question 7

what happens when ppf moves both axis (line stays parallel i think)

Answer 7

economy wide shift

Question 8

budget contraint

Answer 8

the line. ppf. yeah

Question 9

How do you find opportunity cost in a graph

Answer 9

the slope

Question 10

shift in demand (how to show on graph)

Answer 10

demand line moves

Question 11

diminishing marginal product

Answer 11

when time goes on, this can happen (marginal cost goes up)

Question 12

perfectly competitive market

Answer 12

homogenous products.MANY SELLERSin extreme, the products are identical and perfect substitutes

Question 13

cost vs price

Answer 13

cost is what producers pay. cost is what consumers pay

Question 14

cost-benefit principle

Answer 14

identifying the costs and beneifts and pursing that of which the beneifts outweigh costs

Question 15

economic surplus

Answer 15

total benefits - total costs. shows how much a decision has improved well-being

Question 16

opportunity costs

Answer 16

the true cost of something is the next best alternative you have to give up to get it

Question 17

production possibility frontier

Answer 17

shows the different sets of output that are attainable with your scarce resources

Question 18

marginal principle

Answer 18

decisions about quantities should be made in increments. break it into marginal costs and benefits

Question 19

marginal costs

Answer 19

the extra cost from one extra unit (so I don’t think this includes fixed costs)

Question 20

rational rule

Answer 20

if something is worth doing, keep doing it until mb=mc

Question 21

individual demand curve

Answer 21

a graph plotting the quantity of an item that someone plants to buy at each price

Question 22

rational rule for buys

Answer 22

buy more of an item if the mb of 1 more is greater than or equal to the price

Question 23

individual supply curve

Answer 23

a graph plotting the quantity of an item that a business plans to sell at each price

Question 24

law of supply

Answer 24

tendency for quantitiy supplied to be higher when price is higher

Question 25

diminishing marginal benefit

Answer 25

each additional item yields a smaller MB than the previous item

Question 26

marginal product

Answer 26

the increase in output that arises from an additional unity of input (like labor)

Question 27

planned economy

Answer 27

basically communism. centralized decisions are made about what is produced, how, by who, etc.

Question 28

market economy

Answer 28

each individual makes their own production and consumption deciosns buying and selling

Question 29

market

Answer 29

a setting bringing together potential buyers and sellers

Question 30

equilibrium

Answer 30

when quantity supplies is equal to quatntity demanded

Question 31

shifters of demand

Answer 31

- preferences - expectations -income -type and # of buyers - price of related goods

Question 32

shifters of supplies

Answer 32

- type + # of sellers - expectations - input prices - productivity - prices of other products sellers could do/make

Question 33

price elasticity of demand def

Answer 33

a measure of how responsive buyers are to price changes

Question 34

price elasticity of demand equation

Answer 34

(%change in Q demanded)/(%change in P)

Question 35

price elasticity of demand measuring

Answer 35

-1 < ED<1 = inelastic

Question 36

total revenue equation

Answer 36

price x quantity

Question 37

income elasticity of demand def

Answer 37

a measure in how responsive the demand for a good is to changes in income

Question 38

income elasticity of demand equation

Answer 38

(%change in Q demanded)/(%change in income)

Question 39

income elasticity of demand measuring

Answer 39

if negative= inferior goods , if positive = normal good

Question 40

price elasticity of supply def

Answer 40

a measure of how responsive sellers are to price changes

Question 41

price elasticity of supply equation

Answer 41

(%change in Q supplied)/(%change in P)

Question 42

price elasticity of supply measuring

Answer 42

always positive

Question 43

what will a perfectly inelastic look like

Answer 43

vertical

Question 44

to find %change

Answer 44

midpoint formula : (Second x - first x) / (( Second X+ first x)/2)

Question 45

price ceiling

Answer 45

maximum price sellers can charge

Question 46

price floor

Answer 46

minimum price sellers can charge

Question 47

binding price floor/ceiling

Answer 47

prevents hitting equalibrium

Question 48

difference in differences

Answer 48

( treatment after P - Treatment before P) - ( control after P - control before P)

Question 49

What are the criteria for a control

Answer 49

control must trend in same direction and magnitude as treatment AND it must be unaffected by treatment

Question 50

economic surplus

Answer 50

total benefits minus total costs

Question 51

economic efficiency

Answer 51

market is more economically efficient if it yields more economic surplus

Question 52

efficient outcome

Answer 52

yields largest possible economic surplus

Question 53

consumer surplus

Answer 53

the economic surplus you get from buying something (MB-price)

Question 54

market failure

Answer 54

when the forces of supply and demand lead to an inefficient outcome

Question 55

producer surplus

Answer 55

economic surplus you get from selling something (price-MC)

Question 56

deadweight loss

Answer 56

how far economic surplus falls below efficient outcome ( economic surplus at efficient quantity)- (actual economic surplus)

Question 57

how to find deadweight in a graph

Answer 57

the triangle between equilibrium and actual number. Then just figure out area of the triangle

Question 58

government failure

Answer 58

when a government policy leads to worse outcomes

Question 59

Cross price elasticity of demand def

Answer 59

a measure of how responsive the demand of one good is to the price of another

Question 60

Cross price elasticity of demand equation

Answer 60

(%change in quantity demanded) / ( %change in price of another good)

Question 61

Cross price elasticity of demand measuring

Answer 61

if negative= compliments. If positive= substitutes