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ECO 1302 > Midterm Pt.2 > Flashcards

Midterm Pt.2 Flashcards

(72 cards)

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1
Q

Opportunity Cost

A

Refers to a benefit that a person could have received, but gave up, to take another course of action

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2
Q

Positive Statements

A

a subset of economics that analyzes the way the economy actually operates.

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3
Q

Incentives

A

offered to encourage people to make certain choices or behave in a certain way

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4
Q

Scarcity

A

Exists because we have unlimited wants but only limited resources are available to fulfill those wants
ex: Time

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5
Q

Normative Statements

A

a subset of economics founded on value judgments and leading to assertions of what ought to be.

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6
Q

Sources of Comparative Advantage

A

Climate, Natural Resources, Relative Abundance of labour and Capital, Technology, and External Economies

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7
Q

Market Equilibrium

A

A situation in which quantity demanded and quantity supplied are equal

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8
Q

Supply Shifters

A

Price of Inputs, technologicalChange, Prices of Related goods in production, Number of Firms in a Market, Expected Future Prices

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9
Q

Demand Shifters

A

Income, Prices of Related Goods, TASTES, Population and Demographics, and Expected Future Prices

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10
Q

PPF’s (Production Possibilities Frontier)

A

A curve showing the maximum attainable combinations of 2 goods that can be produced with available resources and current technologies

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11
Q

Absolute Advantage

A

Ability of an individual, a firm, or a country to produce more of a good or service than competitors using the same amount of resources, this is not the basis for trade

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12
Q

Specialization

A

refers to people, companies or countries focusing on providing a single good or service, instead of a range of different goods or goods and services in a particular area as opposed to a large one so that they can increase their efficiency and profit.

Not all goods and services are traded​ internationally, production of most goods involves increasing opportunity​ costs, and tastes for products differ.

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13
Q

Exchange

A

Marketplace in which securities, commodities, derivatives and other financial instruments are traded

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14
Q

Comparative Advantage

A

Ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors, this is the basis for trade

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15
Q

GDP(Gross Domestic Product) Definition

A

Measure of economic output= trade balance, consumer spending, government spending, investment

Not adjusted for pollution or other negative effects of pollution

Not adjusted for Changes in Crime and Other Social Problems

Frequently used as a measure of well-being

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16
Q

GDP Component Categories

A

C+I+G+NX

Consumption, Investment, Government Purchases, and Net Exports

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17
Q

Real Vs. Nominal

A

…The value of goods and services evaluated at base-year prices

…Calculated by summing the current values of final goods and services

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18
Q

Definition of Recession

A

A period during which production and employment are decreasing

period of at least two consecutive quarters of decline in GDP

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19
Q

Law of Supply

A

Increase in Price, Causes Increase in Quantity

Price decreases, quantity supplied decreases.

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20
Q

Law of Demand

A

Decrease in Quantity, Causes Increase in Price

Increase in Quantity Causes increase in Price

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21
Q

Capital

A

Physical…, such as machinery, that is used to produce other goods

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22
Q

GDP Deflator

A

Nominal GDP
____________________X100
Real GDP

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23
Q

Substitutes

A

Goods and Services that can be used for the same purpose

Ex: Coca Cola, Pepsi

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24
Q

Compliments

A

Goods and Services that are used together

PB&J, Ice Cream and Hot Fudge

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25
Surplus
Quantity supplied is greater than demanded
26
Shortage
Q demanded is greater than supplied
27
Final Good
Not used to make something else | ex:Pickup Truck, New home
28
Intermediate Good
Used in production of another good | ex: Cotton, Coffee beans purchased by a coffee shop
29
Difference between a normal and inferior good
when income​ increases, demand for a normal good increases while demand for an inferior good falls.
30
Types of goods
1. Durable good- lasts 3 years or more when regularly used 2. Nondurable good- lasts fewer than 3 years when regularly used 3. Consumer good- intended for final use by individuals (consumers) 4. Capital good- tool or good that is used by businesses to produce other products (producers)
31
Factors of production
Land, Labor, Capital, and Entrepreneurs
32
GDP per capita
GDP per person (real GDP divided by population)
33
Business cycle
fluctuation in economic activity that an economy experiences over a period of time
34
Trade-Offs
Alternatives that must be given up when one is chosen rather than another
35
Laissez Faire
idea that government should play as small a role as possible in economic affairs
36
Risks of buying stocks
the company might earn low profits, or the investor could lose money (capital loss)
37
Circular flow model
a model of how the economy's resources, money, goods and services flow between households and firms through resource and product markets.
38
Factor of production
any resource used in a production process. Resources are grouped into labor, land, capital and entrepreneurship.
39
Labour
the physical and intellectual effort of people engaged in producing goods and services.
40
Human capital
the knowledge and skills acquired by labor, principally through education and training.
41
Inflation
an increase in the price level.
42
Consumer price index
a measure comparing the prices of consumer goods and services that a household typically purchases to the prices of those goods and services purchased in a base year
43
GDP deflator
a measure comparing the prices of all goods and services produced in the economy during a given year to the prices of those goods and services purchased in a base year
44
Government purchases
all goods and services bought by the government
45
Net exports
an economy's exports to other economies, minus its imports from other countries.
46
Transfer payments
income received but not earned. | Examples is winning the lottery.
47
Discouraged worker
are people of legal employment age who are not actively seeking employment or who does not find employment after long-term unemployment.
48
Investment
Spending on capital equipment, inventories, and structures, including household purchases of new housing
49
Consumption
Spending by households on goods and services, with the exception of purchases of new housing.
50
Cyclical Unemployment
begins with the recessionary phase of the business cycle; caused by a decline in total spending.
51
Frictional Unemployment
"between jobs" associated with people searching for jobs or waiting to take jobs in the near future
52
Structural Unemployment
associated with the mismatch between jobs and the skills or locations of those unemployed.
53
Natrual rate of unemployment
are people of legal employment age who are not actively seeking employment or who does not find employment after long-term unemployment.
54
C
Value of all goods and servies bought by households
55
I
Investment : Spending on Capital, a physical asset used in future production (investment spending becomes capital after the time period in which it was spent)
56
G
Government spending: Includes all government spending on goods and services but excludes transfer payments
57
NX
Net Exports: Exports (goods sold to other countries) - Imports (goods bought from other countries)
58
Y
Value of total output
59
Y=
C I G NX (total expenditure)
60
Stock
A quantity measured at a point in time
61
Inventory Investment
Change in the value of all firms inventories, counted under investment
62
GDP Deflator Formula
Nominal GDP/Real GDP * 100
63
Private Saving
(y-t) - C (disposable income minus consumption)
64
Public Saving
T-G (taxes minus govt spending)
65
Stock
a quantity measured at a given point in time,
66
Flow
a quantity measured per unit of time.
67
Investment
consists of items bought for future use.
68
Factors of production
the inputs used to produce goods and services. 1. Capital (K) 2. Labor (L)
69
Interest rate
The cost to use someone else's money for a period of time.
70
Real interest rate
Nominal interest rate - inflation rate
71
Loanable funds
- affected by Investment, Savings and real interest rate. Measures the supply of loanable funds in a given market - when r rises, S must fall
72
What is economic growth?
Economic growth is an increase in the capacity to produce goods and services compared from one time to another.

ECO 1302 (2 decks)

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