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micro econ > Mid Term 1(Chapter 1-4) > Flashcards

Mid Term 1(Chapter 1-4) Flashcards

1
Q

What is economics

A

Economics is the social science that studies the choices individuals, firms, and governments make when coping with scarcity and the incentives that influence and reconcile those choices

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2
Q

what is micro economics

A

Micro economics studies the choices made by individuals and firms and how those choices interact with markets and influence governments

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3
Q

what is macro economics

A

macro economics studies the performance of the national and global economies including trade, or monetary/fiscal policy

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4
Q

what are incentives and costs

A

incentives are the rewards we get from choices we make and costs are are what we lose from the choices we make

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5
Q

what are the two big economic questions

A

How do choices end up determining what we produce, how we produce, and who we produce it for
When do choices made in pursuit of self interest also promote social interest

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6
Q

what is self interest

A

making choices that are best for you

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7
Q

what is social interest

A

making choices that are best for society
Has two dimensions: efficiency and equity

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8
Q

what are the four factors of production

A

Land, Labour, Capital, Entrepreneurship

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9
Q

what does each factor provide

A

land gets rent, labour gets wages, capital gets interest, entrepreneurship gets profit

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10
Q

What are the six key ideas that define the economic way of thinking

A

a choice is a tradeoff, people make rational choices by comparing costs and benefits, benefit is what you gain from something, cost is what you must give up to get something, most choices are “how much” choices made at the margin, choices respond to incentives

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11
Q

what is opportunity cost

A

the highest valued alternative you give up when choosing another option

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12
Q

What are the two types of economic statements

A

positive, normative

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13
Q

what are positive statements

A

statements that can be tested against facts

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14
Q

what are normative statements

A

statements that are opinion based and can not be tested

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15
Q

what are economic models

A

they make predictions then are tested by comparing it with facts

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16
Q

what are alternatives to economic models

A

statistical investigations, natural experiments, economic experiments

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17
Q

what are the skills needed for economics jobs

A

critical thinking, analytical skills, math skills, writing skills, oral communication skills

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18
Q

what are some current issues regarding self and social interest

A

globalization, information aged monopolies, climate change, covid 19 pandemic

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19
Q

what is market capitalism

A

an economic system wehre individuals own land and capital which can be bought and sold in markets. these markets along with supply and demand determine what is made, how its made, and who its made for

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20
Q

what is centrally planned socialism

A

an economic system where the government owns the land and capital and decides what is produced, how its produced, and for who. the only country still usign 5this today is cuba and north korea

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21
Q

what is a mixed economy

A

a market economy with government regulation for certain things

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22
Q

what are modern protesters arguments against market economies

A

large corporations ahve too much control, governemnts can allocate resources better, more regulation in social interest is needed, every winner in a market creates a loser,

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23
Q

what is the production possibilities frontier

A

PPF shows the opportunity cost between two production possibilities. outside the curve is impossible, inside the curve is inefficient

24
Q

what is production efficiency

A

achieved when you can not produce one more unit of a good without producing less of another good

25
Q

what is marginal benefit

A

the benefit you get from one additional unit of a good. decreases due to principle of decreasing marginal benefit

26
Q

what is marginal cost

A

the opportunity cost of producing one additional unit of a good

27
Q

what is allocative efficiency

A

the intersection between the marginal benefit and marginal cost curves

28
Q

what do each of the marginal curves mimic

A

marginal benefit mimics demand, marginal cost mimics supply

29
Q

What is gain on trade

A

when two people who each have a comparative advantage in a product specialize and make a trade between each opportunity cost they both increase total production without increasing opportunity cost

30
Q

what is the real circular flow in economic coordination

A

households provide factors of production to firms, firms provide goods and services to households

31
Q

what is the money circular flow in economic coordination

A

households provide expenditures to firms, firms provide rent, wages, interest, and profits to households

32
Q

why is the PPF bowed outwards

A

because the more you make of each good the higher the opportunity cost of the other. this is due to resources being more efficient at producing certain products

33
Q

how is marginal cost represented by the PPF

A

the marginal cost at any point on the PPF is the slope at that point

34
Q

what is economic growth

A

the expansion of the PPF outwards

35
Q

how does economic growth take place

A

either technological change or capital accumulation. the resources used to power economic growth can not be used to create consumer goods and services so economic growth has an opportunity cost

36
Q

what do decentralized economies need

A

firms, markets, property rights, money

37
Q

what is a firm

A

an economic unit that hires factors of production and organizes them

38
Q

what is a market

A

an arrangement that allows buyers and sellers to get information and do business with eachother

39
Q

what are property rights

A

social arrangement that govern the ownership, use, and disposal of anything valuable

40
Q

what is money

A

any commodity or token that is generally accepted as payment

41
Q

what is a competitive market

A

many buyers and sellers but no one buyer or seller has control over the market

42
Q

what is the money price

A

the number of dollars that must be given in exchange of a good or service

43
Q

what is the relative price

A

ratio of money price of one good to anohter. is na opportunity cost

44
Q

what is demand

A

demand means someone wants something, can afford it, and plans to buy it

45
Q

what is quantity demanded

A

the amount of a good consumers plan to buy at a given price over a certain period of time

46
Q

what is the law of demand

A

other things equal, as price increases quantity demanded decreases and vice versa

47
Q

what is the substitution and income effect

A

substitution effect means as the price of a good rises consumers will look to substitutes to replace that good
income effect means as the price of a good rises it takes up a larger amount of consumers incomes and they will either buy less or stop buying the good

48
Q

what factors lead to a change in demand

A

the prices of related goods, expected future prices, income, expected future income and credit, population, preferences

49
Q

What is supply

A

supply is when a firm has the resources to produce a good, can profit from producing it, and plans to produce it

50
Q

what is quantity supplied

A

the amount of a good producers plan to produce in a certain amount of time

50
Q

what is the law of supply

A

other things equal, as price increases quantity supplied increases and vice versa

51
Q

what factors cause a change in supply

A

the prices of factors of production, the prices of related goods produced, expected future prices, the numebr of suppliers, technology, the state of nature

52
Q

what is market equilibrium

A

the point where quantity demanded is equal to quantity supplied

53
Q

how does price adjust markets

A

in a shortage price increases to decrease demand and increase supply until equilibrium is reached
in a surplus price decreases to decrease supply and increase demand until equilibrium is reached

54
Q
A

micro econ (3 decks)

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