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Economics > Exam One > Flashcards

Exam One Flashcards

1
Q

Economics

A

study of how a society with unlimited wants, ultimately allocates scarce good and services across competing ends.

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2
Q

Allocation (distribution)

A
  • 1.) willingness to pay - determines if you buy it or not
    2. ) first come, first served - opportunity cost
    3. ) special characteristics
    4. ) lottery, raffle - random chances
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3
Q

Production Possibilities curve (PPC)

A

explains or predicts changes in output (economic growth)

* how do you get income to rise?

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4
Q

Demand & Supply Curve

A

market price & quantity sold in that market

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5
Q

Factors of production

A
  1. ) labor (workers) - wages
  2. ) capital (money spent on machines, buildings, equipment; etc.) - interest
  3. ) land (rent)
  4. ) entrepreneurship (leadership skills, adaptability, innovation, risk taking, knowledge) - profit
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6
Q

Factors & Returns

A
  • labor _________________ wages
  • capital _______________ interest
  • land _________________ rent
  • entrepreneurship _______ profit
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7
Q

PPC

A

explain predict changes in output

* variable on axis of any graph

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8
Q
  • if shift variable changes, then curve will shift
A

.

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9
Q

Opportunity cost

A

explicit cost (+) implicit cost

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10
Q

Marginal analysis

A

analyze how small changes in one variable affect another variable

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11
Q

Law of Comparative Advantage

A

if 2 countries specialize in producing goods where they have comparative advantage, and trade, then possible for both countries to become better off.

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12
Q

Demand curve

A

quantity demanded at each possible price; as the price of the good decreases, the quantity increases -> vice versa

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13
Q

Supply curve

A

quantity supplied at each possible price; as the price decreases how will the firms react?

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14
Q

What kind of slopes do the demand and supple curves have?

A

Demand - negative

Supply - positive

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15
Q

Demand-related shift variable

A

a variable that relates directly to the “demand decision” (my decisions to buy)

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16
Q

What are the demand-related shift variables?

A
  1. ) price of substitutes
  2. ) price of complements
  3. ) expectation of demanders
  4. ) income
  5. ) number of demanders
  6. ) tastes and preferences
  7. ) taxes on demanders (tax is added at the point of sale)
17
Q
  • consumers prefer lower prices

* suppliers prefer higher prices

A

.

18
Q

Shift variables for demand curve

A

variables that directly relate to demand

19
Q

What does normal goods mean for firms?

A

incomes increases - buy more

20
Q

What does inferior goods mean for firms?

A

income increase - buy less

21
Q
  • if you have more money (income) you will tend to buy less of inferior goods
A

.

22
Q

Shift variables for supply curve

A
  • variables that directly relate to supply decision
23
Q

What are the supply-related shift variables?

A
  1. ) cost of supplying
  2. ) technology
  3. ) expectations of suppliers
  4. ) number of suppliers
  5. ) productivity
  6. ) taxes on suppliers - tax is included in price (gas)
  7. ) weather
24
Q
  • if the slope is (-) negative, the equation must be demand
A

.

25
Q

Elasticity

A

responsiveness

26
Q

What are the factors that elasticity has?

A
  1. ) slope of curve and responsiveness
  2. ) measurement of elasticity
  3. ) interpretation of the market
27
Q

What are the 3 measurements of demand?

A
  1. ) own price elasticity
  2. ) income elasticity
  3. ) cross price elasticity
28
Q

What are the two different types of price controls?

A
  1. ) price max (price ceiling) rent control

2. ) price minimum (price floor) minimum wage

29
Q

If you impose either of the price controls, what are the two different effects you could have?

A
  • direct effect

- indirect effect

30
Q

Price controls

A

what happens if a market can’t get to equilibrium? (government involvement)

31
Q

Commodity tax

A

tax on exchange of good or service

  • tax on demanders (tax is added to P at sale)
  • tax on suppliers (tax is included in price)
32
Q

Tax wedge

A

difference between pre/post tax price … the effect of tax on each unit

33
Q

Consumer bürden (CB)

A

change in price paid by consumers as the result of tax

34
Q

Producer burden (PB)

A

change in price that suppliers keep and use as total revenue (after pulling out tax)

35
Q

Math equation for tax

A

CB + PB

Economics (3 decks)

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