microeconomics Flashcards
(55 cards)
Microeconomics is concerned with…
decision making by individual customers, workers, households, and business firms
economizing problem
people need to make choice because economic wants exceed economic means
Economics is concerned with
how individuals, institutions, and society make the optimal choices under conditions of scarcity
Economic systems differ…
as to (1) who own the factors of production and (2) the method used to motivate, coordinate, and direct economic activity.
Economic System are
a particular set of institutional arrangements and a coordinating mechanism
An economy is producing on its production possibilities curve when
they are utilizing the different combinations of goods and services that that can be produced with full employment
Demand
a schedule or curve that shows the various amount of a product that consumers are willing and able to purchase at a series of possible prices during a specified period of time
When the price of a product increases (demand)
quantity demanded falls, there is negative relationship with price and quantity demanded. this is the law of demand
Normal good
products whose demand varies directly with the money income,
When the price of a product increase (supply)
the higher the price, the more producers will supply
Changes in demand occur in our occur demand curved is shifted which can happen because of a change in determinants of demand, what are these deteminants
tastes, number of buyers, income, prices of related goods, consumer expectations
Market Failure
Market Demand curve must reflect the full willingness to pay of every person receiving benefits from the products being sold in the market.
Market supply curve must reflect all of the costs of production, including those that may fall onto persons not directly involved with the production of the product being sold.
total surplus
measures the net benefits accruing to society from the conversion of scarce resource inputs into various forms of output.
Consumer surplus (where is it on the graph, how is it defined, how is it derived)
it the triangle above the equilibrium price. the share of the total surplus that is received by a consumer or consumers in a market. it is defined by the max price a consumer is willing to pay and the actual price they to pay
Producer surplus
is the triangle below the equilibrium price
Productive efficiency
achieved because competition forces producers to use all tech and resources available.
Allocative efficiency
the correct quantities of a good are produced relative it other goods and services
efficiency losses analyzes
the case of underproduction by considering what happens if out put falls from the efficient level to a smaller amount. Also known as deadweight loss, its the triangle
Negative externalities
when producer or suppliers impose costs on third parties who are not directly involved in a market transaction , it includes pollution
Positive externalities
people who are not directly related to the market transaction recieve benefit.
Government intervention
direct control, subsidies and govt provision, pigovian taxes
Direct Control
force the firms to incur the actual costs of their negative externalizes, such as pollution.
Pigovian taxes
levy taxes or charges on the related good, tax items that cause a lot of damage.
subsidies
support either buyers, producers, or a provision that provides for all the poeple like a smallpox vaccine
