Study Guide - Midterm Flashcards
What is microeconomics?
The study of how society manages its scarce resources.
How people make decisions - 5 Principles
- Trade-Offs
- Opportunity Cost
- Decision Making
- Incentives
- Trade Makes People Better Off
Competitive Advantage
The ability to produce goods or services at lower opportunity costs compared to another producer.
What is an Autarchy
A country with no trade.
Absolute Advantage
The ability to make goods at lower costs.
What is a Demand Curve
A function that shows the quantity demanded at different prices.
Quantity Demanded
The quantity that buyers are willing and able to buy at a particular price.
A demand curve can read:
Horizontally - At a given price, how much are people willing to buy? Look at price then quantity.
Vertically - What are people willing to pay for a given quantity? Look at quantity then price.
An increase in demand shifts the demand curve which way?
To the Right - At each price, people are willing to buy more.
At each quantity, people are willing to pay a higher price.
Decrease in demand shifts the demand curve which way?
To the Left - At each price, people want to buy less.
At each quantity, people want to pay a lower price.
Factors that shift demand
Income.
Consumers, Buyers.
Price of substitutes.
Expectations.
Preferences.
What is a Supply Curve
A function that shows the quantity supplied at different prices.
Quantity Supplied
The quantity that sellers are willing and able to sell at a particular price.
A supply curve can read:
Horizontally - At a given price, how much are suppliers willing to sell.
Vertically - To produce a given quantity, what price must sellers be paid.
What is the Law of Supply
As the price rises, the quantity supplied increases.
