first half of semester Flashcards
(91 cards)
1
Q
Positive Economics
A
A leads to B. Cause and effect. Ex: in a system where citizens keep the money they earn, the society is more prosperous
2
Q
Normative Economics
A
Has unintended consequences. What should happen. Ex: citizens should be able to keep all the money they make
3
Q
Praxeology
A
The study of human actions. We choose what is best for us. we value more than what we value less
4
Q
Catallactics
A
the choices that we make in the market place depending on what they make/sell
5
Q
Cui bono?
A
who benefits? for whose good is it?
6
Q
Ceteris paribus
A
if you isolate this then A will lead to B; nothing else changes
7
Q
Value is…
A
mutable, subjective, and ordinal
8
Q
Economic Freedom means..
A
safe property rights. we can’t be free without property rights
9
Q
Personal Utility
A
something that is useful to us
10
Q
How do we determine value?
A
- Utility
2. Scarcity
11
Q
Marginal Utility
A
How much one more unit is worth
12
Q
Who was Carl Menger?
A
he came up with subjective value
13
Q
Economics
A
choosing what you value more over what you value less
14
Q
what are 2 ways a society decides what to produce?
A
- the government decides (in a socialist system)
2. consumers (free-market)
15
Q
Consumers goods
A
goods consumers buy such as food, clothes, cars, cell phones, etc.
16
Q
Producer goods
A
what producers buy based off of what the consumer buys
17
Q
Chain of command
A
consumers tell the producers what they want
18
Q
marginal buyers
A
at the margin is where these buyers’ behaviors change. buyers can come into the market as a result of a price drop or drop out of the market as a result of prices rising
19
Q
role of prices:
A
- can attract resources to a certain market
- limits how much you’ll buy
- encourages people to conserve scarce resources
- control the allocation of resources
- coordinate economic activity
20
Q
Opportunity costs
A
spending money one way so that you can’t spend that money another way. What you give up to buy something else
21
Q
Intrinsic value
A
how much value we give to an object
22
Q
prices are determined by…
A
SUPPLY AND DEMAND
23
Q
What is it called when the price for a product is fixed to keep away from the market clearing price?
A
a government price control
24
Q
Market clearing price
A
where the supply and demand for a product is even
25
more supply than demand means a...
surplus
26
cure for a surplus?
let the prices fall to the marketing clearing price
27
what do we call a price control that keeps the price from going lower?
A price flooring
28
what do we call a price control that keeps the price from going higher?
A price ceiling
29
Shortage
not enough for everyone because of price
30
Scarcity
physical reality. The stuff doesn't exist. all used up
31
caused by government intervention blocking the marketing from finding the market clearing price
Price Phenomenon
32
Above the market price?
more supply than demand
33
Below market price?
more demand than supply
34
Rent Control
putting a ceiling over the price of rent so that the price cannot go any higher
35
Elastic Demand
how sensitive or responsive the demand is for a product when there is a change of price on the product
36
Inelastic Demand
response to changes in price is very small
37
Government control causes....
shortages
38
Price gouging
when a company is supposedly setting high prices
39
Predatory pricing
when companies set their prices very low
40
Does it make sense for a merchant to sell a product for high prices?
yes. because then someone who really needs it can get it without the fear of that product being sold out
41
who does predatory pricing bother?
the competitor because their company might not be able to set prices that low
42
Competition is the great protector of the...
consumer
43
Buyers market
in favor of the buyers. more sellers than buyers so there are low prices
44
Sellers market
more buyers than sellers so prices are higher
45
Markets constantly need...
adjustment (gradually; over time)
46
A company's success depends on the...
consumer
47
when revenue is greater than exp
gain
48
when losses are greater than revenues
loss; either need to fix this or get out
49
Private property (free market)
people can build what they want
50
Private property (socialist)
planned economy so they can't build what they want; no choice
51
Price (free market)
vital in free market because they coordinate function. communicate between consumers and sellers what they value most
52
Price (socialist)
prices are dictated. don't reflect what consumers want so there are constant surpluses and shortages
53
Profit (free market)
new wealth that adds to the wealth of the society. people getting rich are providing superior customer value
54
Profit (socialist)
there is not profit being made because whatever is made is spread evenly to everyone
55
What are the 3 P's
1. Private Property
2. Price
3. Profit
56
A healthy economy...
destroys jobs and unprofitable businesses because they are detracting from other profitable businesses that are providing customer service better
57
A&P, Montgomery Ward, and Kodak are examples of...
companies that went out of business because they failed to adapt to the customers changing wants and needs
58
Division of Labor
specialization; putting someone in charge that knows how to do the job and get it done well as opposed to someone who doesn't know the business and can't do the job
59
Consumer sovereignty
consumers don't dictate the prices because prices would be too low for suppliers, but they do help set the prices based on how much they pay for a product
60
Law of diminishing returns
states that in a production process, as one input variable increased, there will be a point at which the marginal per unit output will start to decrease holding all other factors constant
61
Economies of scale
sometimes advantages to a company getting large.
62
What are the costs of a company
1. Fixed costs
| 2. Variable costs
63
Fixed costs
not changing. set prices that have already been paid
64
Variable costs
things that happen that aren't expected or planned for
65
Learning Curve
you learn more as you practice. so it will take longer the first few times to make a product than it will later on
66
Diseconomies of scale
having too many workers that slow down production
67
The Factors of Production
1. Land (raw materials)
2. Labor (workers)
3. Capital (Equipment to produce with)
4. Mind (an entrepreneur; a vision)
68
3 value-creating forms of income
1. Labor--work for it!
2. Investment--savings
3. Entrepreneurial--succeeds in creating value for customers
69
fixed cost per unit =
total fixed costs divided by number of units
70
More output =
lower labor costs
71
Productivity
doing your work faster and better
72
The iron law of wages
more workers=lower wages. workers were doomed to low wages that just keep them alive because there were so many poor people that needed jobs
73
Discrimination
prejudice in the 40s because people wouldn't be hired because of race or gender
74
Rent
special meaning in economics. Individual business revenue/income attributable to special governmental rules
75
Unions
organizations meant to better the work conditions for employees. weren't used to be allowed to join a union, now workers are compelled to. We should be able to choose if we want to join a union or not
76
Who was John L. Lewis?
worked in the coal mining industry. was able to raise the wages for workers but wages were raised so high that people had to be laid off because the employers couldn't afford it. High wages led to high prices for coal so people stopped buying coal and started buying oil
77
Wages are determined by...
the supply and demand of workers
78
Political rent
income to a business or individual that is the result of political intervention--not economic intervention
79
What does capital do?
it improves what the labor can do which means they are more productive
80
Capital per Capita
shows which societies are the wealthiest. More productive because of how much capital they have
81
3 components of interest rates:
1. Original rate (time preference)--discount the future
2. Risk Premium (factor)-- the riskier the venture, the higher rate of interest on that loan
3. Inflation Premium--increase in prices over a period of time
82
Definition of money:
1. medium of exchange
2. unit of account (to measure profit/loss)
3. store of value (lasing store of purchasing power)
4. that which makes indirect exchange possible
5. (ludwig Von Mises's definition) the most marketable commodity
83
Money needs to be
1. durable
2. portable
3. divisible
4. valuable
5. useful in making products
84
how do societies become wealthy?
1. well-developed division of labor
2. Productivity of labor
3. price system that communicates prices between buyers and sellers
4. reliable money
85
Gresham's law
bad money drives out good money because one form of money is overvalued, people will use a different form of money to make purchases
86
Legal tender laws
the force of law compels a person to accept money that isn't worth as much as the product. causes negative sum transactions
87
Hyperinflation
high inflation
88
Bimetallic
gold is worth more not as money but at metal
89
deflation
when prices fall
90
Fractional reserve banking
keeping 100 dollars of what people put into the bank
91
Federal reserve
depreciating our currency when it was supposed to stabilize our money
