Part 1 COPY Flashcards Preview

1P91 ECON - Microeconomics > Part 1 COPY > Flashcards

Flashcards in Part 1 COPY Deck (24):
1

What logical fallacy assumes that since Y event follows X event, that X event must cause Y?

Post hoc ergo propter hoc

Correlation is not causation

2

What logical fallacy rebuts an argument not through addressing the argument, but instead by deflecting, calling names, or attacking the motives or character of the person making the argument?

Argumentum ad hominen

3

What logical fallacy assumes that something must be true because many believe it?

Argumentum ad populum (appeal to popularity)

4

Other than the latin named types, name 4 logical fallacies and explain

Overgeneralisation - from the few expanding to the whole
Appeal to emotion - using emotional response to justify an argument
Appeal to experts - using uncited references > experts can be wrong
Straw man - Taking an aspect of an argument and expanding it into a larger insinuation/proposition that can be easily torn down. Ie. Tearing down an argument that was not original but instead designed.

5

What are two types of thinking? Briefly explain each

Deduction and induction.
Deduction utilizes universal truths and narrows to the particular in a logical manner.
Induction will go from the specific to the general (common is stats where samples must be used.

6

What was the most recent economic revolution? Who was the big thinker? What is the big idea?

Game Theory. John Nash, Reinhard Selten, John Harsanyi. Study of strategic interactions as games.

7

Who is responsible for the Mathematical Revolution? What was his book? What scientific theory was used?

Paul Samuelson. Foundations of Economic Analysis (1947). Grounded economics in mathematical optimization. Used Thermodynamics.

8

In what period did the marginal revolution occur? Who were the big thinkers? What was the big idea?

Occurred in the late 19th century. William Stanley Jevons: A general mathematical theory of political economy(1862) . Alfred Marshall: Principles of Economics (1890)

Investigated supply and demand - the time and use effect on value.

9

What was the hallmark of Adam Smith's An inquiry into the nature and causes of the wealth of nations (1776)?

Division of labour is a main driver of economic growth

10

In what period did the enlightenment happen? What people and events are associated with the enlightenment? What was enlightenment thought?

Period: 1715 - 1789
People and events: Voltaire was a major person. Events were the French and American Revolutions.
People: Adam Smith: Writes the first work in economic theory: An inquiry into the nature and causes of the wealth of nations (1776)
Thought: Society based on idea that all men are created equal, reason, and natural law. Economically, call for enlightened self interest > greed is not good > furtherance of others to further yourself.

11

What were the 5 economic revolutions? What period did they take place?

1st revolution: The enlightenment - 18th century
2nd revolution: The marginal - 19th Century
3rd Revolution: The Mathematical - 20th Century
4th Revolution: The Game Theoretic - 20th Century 5th Revolution: now - name ???

12

What is opportunity Cost? Give an example.

The opportunity cost of an action is the best alternative to that action.

For example: you have a choice between 3 options: 1) facebook, 2)reading a book, 3) watching star wars. You don't like reading so your opportunity cost of facebook is watching star wars

Everything has a price

13

How is the trade off between production goods within an economy illustrated? What is the slope of this diagram called?

The tradeoff is illustrated in a diagram called the Production Possibilities Frontiers (PPF). The slope of the PPF is called the marginal rate of transformation (MRT)

14

What are reasons that a PPF may shift?

• Reasons for the shift may be:
○ Natural events - disasters etc.
○ Technology change
○ Population change - manpower
○ Capital accumulation - of stuff and human capital
○ Trade
○ Political and economic institutions
As argued by economist Acemoglu

15

What is the law of Demand?

Law of Demand: As the price of a good or service goes down, quantity demanded goes up

16

What factors can cause change in demand?

Ø Income levels will influence demand
○ Normal goods will increase in demand when income goes up
○ Inferior goods will decrease in demand when income goes up
Ø Population will influence demand
○ For example: a rising amount of seniors in a population will increase demand for prescription drugs.
Ø A change in the price of substitutes will influence demand
○ Example: in 1910 prostitution was a very profitable occupation. Now it is not. Reason: prostitution was a substitute for casual sex. As casual sex became more common, demand for prostitution decreased.
○ Example: If the price of coffee goes up, the demand for tea (a substitute for coffee) will go up
Ø A change in the price of complements will influence demand
○ Example: Coffee and sugar: if the price of coffee goes up, the demand for sugar will go down.
Ø Expectations will influence demand
○ Example: In the expectation of a hurricane the demand for plywood goes up
○ Example: The expectation of a particularly bad winter will increase demand for shovels or snow blowers
Ø Tastes will influence demand
○ The more people decide that they want something the more the price goes up
Example: Chinese consumers develop a taste for Nova Scotia lobster - increases demand and price for Nova Scotia lobster

17

What is consumer surplus? What is the calculation?

Consumer Surplus (CS) is a way to measure consumer benefit from buying a good or service.
CS = WTP (max price willing to pay) - Price

18

In general terms, how is the consumer surplus calculated on a demand curve?

By calculating the area of a triangle. (Height)(length) / 2.

For example: if the max price for a good is $100. and the market price is $50 which meets a demand for 10 units. Then Length = 10, height = 100-50 = 50 .

50 * 10 / 2 = $250 CS

19

What can change supply?

○ Technology/innovation
○ Taxes/subsidies
○ Expectations
○ Entry and exit of producers
○ Changes in opportunity cost
○ State of nature
Eg. Drought causes a lower supply of wheat

20

What is the producer surplus?

○ Producer surplus (PS)
○ Difference between the price the producer gets on the market and the minimum price he will accept
○ The supply curve represents different producers min price

○ Example: You are a beer producer
○ Min price = $8 per pint
○ Actual price = $10 per pint
PS = actual price - min price (2=10-8)

21

What is the law of supply

Law of supply states that when prices are higher, producers produce more quantity

22

Describe a supply and demand surplus situation. What should occur to correct this?

Supplier are attempting to sell goods at too high a price - the quantity demanded is low. Therefore there is a surplus of goods.

To correct - the suppliers will reduce price to sell surplus. Then demand will increase as price lowers. This will return things to equilibrium

23

Describe a supply and demand shortage situation. What should occur to correct this?

The price suppliers are asking is lower than it should be - therefore the qty demanded is higher - creating a shortage.

To correct - suppliers will increase there price as demand is high. As the price increases, demand will go down. Both price and supply will trend towards equilibrium

24

How can the supply and demand curve be applied to labour markets?


As there is a surplus or shortage of workers wages will rise and fall. Surplus workers = lower wages. Shortage of workers = higher wages