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ECON 102 > summary > Flashcards

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1
Q

scarcity principle

A

having more of one thing means having less of another

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2
Q

cost-benefit principle

A

an individual should take action if and only if extra benefits are at least equal to extra costs

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3
Q

incentive principle

A

a person is more likely to take action if its benefit rises and less likely if its cost rises

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4
Q

economics

A

study of how people make choices under scarcity

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5
Q

three decision pitfalls

A

treat small proportional changes as insignificant
ignore implicit costs
fail to think at the margin

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6
Q

microeconomics

A

individual choices and group behaviour in individual markets

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7
Q

macroeconomics

A

study of performance in national economies and policies govs use to improve economic performance

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8
Q

demand curve

A

downward sloping line, quantity buyers demand at any given price

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9
Q

supply curve

A

upward sloping, quantity sellers offer at any given price

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10
Q

variations in price

A

effected by willingness to pay

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11
Q

market equilibrium

A

when the quantity buyers demand = quantity sellers offer
measures value of last unit sold and cost required to produce it

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12
Q

excess supply

A

price of a good is above equilibrium value
motivates sellers to reduce prices

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13
Q

excess demand

A

price of a good is below equilibrium value
motivates buyers offer higher prices

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14
Q

what changes effect demand curve

A

increase in demand, increase in equilbrium price and quantity
decrease in demand, decrease in equilibrium price and quantity

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15
Q

what changes effect supply curve

A

increase in supply, decreases in equilibrium price, increase in quantity
decrease in supply, increase in equilibrium price, decrease in qunatity

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16
Q

what changes effect supply curve

A

increase in supply, decreases in equilibrium price, increase in quantity
decrease in supply, increase in equilibrium price, decrease in quantity

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17
Q

efficiency principle

A

efficiency is an important social goal, when pie grows larger everyone can have a bigger slice

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18
Q

equilibrium principle

A

market equilibrium leaves no unexploited opportunities for individuals but may not exploit all gains achievable through collective action

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19
Q

price elasticity of demand

A

measure of how strongly buyers react to change in price
percentage change in quantity demanded for 1% change in price

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20
Q

elastic good

A

price elasticity > 1

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21
Q

inelastic good

A

price elasticity < 1

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22
Q

unit elastic

A

price elasticity = 1

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23
Q

price elasticity of demand/supply at a point formula

A

(ΔQ/Q) / (ΔP/P)
(P/Q) x (1/slope) for straight line

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24
Q

how does reduced price effect elasticity

A

increased total spending if good is elastic
reduced if good is inelastic

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25
how does increased price effect elasticity
increased total spending if good is inelastic reduced if good is elastic
26
when does total expenditure on a good reach maximum
when price elasticity of demand = 1
27
accounting profit
difference between revenue and expenses
28
economic profit
revenue - (explicit + implicit costs)
29
normal profit
difference between accounting and economic profit
30
no-cash-on-the-table principle
if someone owns a valuable resource, market price of that resource will typically reflect its economic value
31
total economy surplus
measure of the amount by which participants in a market benefit by participating in it sum of total consumer surplus and total producer surplus
32
rational consumer
allocates income among different goods so marginal utility gained from the last dollar of each good is the same
33
law of demand
people do less of what they want to do as the cost of doing it rises
34
principle of increasing opportunity cost
rational producers take advantage of their best opportunities first, moving on to more costly/difficult opportunities after the best ones have been exhausted
35
law of diminishing returns
when some factors of production are held fixed, the amount of additional variable factors required to produce successive increments in output grows larger
36
utility maximisation formula
MUa/Pa = MUb/Pb
37
consumer/producer surplus formula
1/2 x Q x ΔP
38
average labour productivity
output / employees
39
aggregate output
C + I + G + NX
40
point price elasticity formula
ΔQ/ΔP x P/Q
41
MC < AVC
AVC decreases
42
MC = AVC
curves intersect, lowest point on graph
43
net investment calculation
gross investment - capital depreciation i - (d+n) k
44
prisoners dilemma
cooperate with a partner, both benefit betray partner for individual reward
45
nash equilibrium
player achieves desired outcome by not deviating from initial strategy, numbers are the same in grid
46
cournot model
rival companies compete on amount of output produced
47
gini coefficient
measure of how different groups receive differing shares of total household income eg bottom 5% may share bottom 1% of income
48
comparative advantage
produce a good at a lower cost than everyone else
49
negative externality
occur when production/consumption impose external costs
50
positive externality
if production/consumption benefits a third party not involved in transaction
51
marginal product capital formula
ΔY / ΔK
52
gross investment per worker
i = sy = 1
53
required investment per worker
(d+n)k
54
constant returns to scale
average inputs and outputs are proportional
55
marginal prosperity to consume
ΔC / ΔY
56
income expenditure multiplier
1 / 1-MPC
57
AS=AD model formula
Y = C+I
58
liquidity trap
occurs when interest rates fall so low that most people prefer to let cash sit than invest
59
increase aggregate demand
when the components of aggregate demand–including consumption spending, investment spending, government spending, and spending on net exports –rise
60
seignorage
profits made by gov issuing currency, difference between face value of coins and production costs
61
elasticity
an economic concept used to measure the change in the aggregate quantity demanded of a good or service in relation to price movements of that good or service
62
price elasticity of demand
percentage change in quantity demanded by change in price
63
profit maximisation monopolies
MR=MC, if MR>MC then more output can be produced for maximisation
64
marginal revenue formula
change in total revenue / change in output
65
marginal cost formula
deriative of total cost
66
perfectly competitive firm price
= MR
67
monopoly price
> MR
68
ultimatum bargaining game
experimental economists game, two parties interact anonymously and only once
69
monopsony
only one buyer in market
70
tragedy of the commons
individuals with access to public resource act in their own interest
71
moral hazard
lack incentive to guard against financial risk
72
production curve increase
capital and labour moves point up curve technological improvement cause curve to shift
73
increased money supply
more economic growth
74
decreased money supply
less economic growth
75
quantative easing QE
buy bonds to increase prices and decrease long term interest rates
76
how does inflation affect unemployment
inflation rises, unemployment falls
77
monetarism
implies nominal income is a function of money supply
78
balance for official financing
balance of monetary movements in and out country
79
coase theorem
bargaining between individuals/groups over property rights causes optimal and efficient outcome
80
marginal product of labour
change in production output / change in input labour
81
isoquants
curve when plotted shows all combinations of two factors that produce a given output
82
perfect compliments isoquants
l-shaped
83
perfect substitutes isoquants
straight line
84
long run equilbrium
when prices adjusted to production costs
85
when is labour supply curve backward bending
when higher wage encourages people to work less and have more leisure
86
monopolist
lone seller of a product
87
oligopolist
one of a few sellers in a market
88
monopolistic competitor
large number of firms that sell similar, but slightly different products
89
market power
power to set the price of a product
90
perfectly competitive firm elasticity
infinitely elastic curve
91
what causes market power
control over important inputs, economies of scale, patents and gov licenses and network economies
92
perfectly discriminating monopolist
charges each buyer their reservation price
93
law of diminishing returns
when a firms capital and other productive inputs are held fixed in the short run adding workers beyond a point increases output less and less
94
positive analysis
objective to determine the consequences of a proposed policy
95
normative analysis
address whether a particular policy should be adopted
96
GDP
market value of final goods produced in a country in a given period
97
cyclical unemployment
caused by changes in economy eg recession/boom
98
frictional unemployment
short-term, when someone is searching for a job
99
structural unemployment
mismatch of skills, may be from increased industrial improvements
100
if price elasticity of demand is 2
buy 2% more of the good in response to a 1% price cut
101
cross price elasticity of demand
percentage change in quantity demand after a price change for another good
102
income elasticity of demand
economic measure of how responsive quantity demanded for a good or service is to a change in income

ECON 102 (26 decks)

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