ECON 2133: Final review
27 Cards in this Set
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Resource Allocation
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scarce resource distribution
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No free lunch
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to get one thing, we have to give up another
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equity/efficiency
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equity is how the benefits are divided among society, efficiency is getting the maximum benefits from its scarce resources
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rational decision making
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takes an action if the marginal benefit exceeds the marginal cost
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fixed costs
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stay the same
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variable costs
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subject to change
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benefits of trade
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allows countries to specialize in what they do best and enjoy a greater variety of goods and services
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market economy
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firms and households control the market
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Adam smith
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capitalism, "invisible hand"
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externality
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impact of 1 person's action on the well being of a bystander
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Market failure
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market fails to produce an efficient allocation of resources
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Opportunity Cost
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what you give up to get that item ex. college athletes who can play professionally
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comparative advantage
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ability to produce a good at a lower opportunity cost than another producer
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competitive market
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many buyers and sellers, each has a negligible impact on the market price
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monopoly
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one seller
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normal good
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increase in income leads to an increase in demand
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inferior good
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increase in income leads to a decrease in demand
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surplus
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excess suply
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shortage
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excess demand
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substitutes
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increase in the price of one leads to an increase in the demand of another ex. hamburgers and hotdogs
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compliments
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increase in the price of one leads to a decrease in the demand for the other ex. peanut butter and jelly
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Variables of demand
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income, prices of related goods, tastes, expectations, and number of buyers
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variables of supply
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input, technology, expectations, number of sellers
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Supply and Demand change
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shift = change in supply and demand
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Quantity supplied and quantity demanded
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movement= change in quantity supplied and quantity demanded
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law of demand
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price rises, demand falls
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law of supply
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price rises, quantity supplied rises
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ECON 2133: CHAPTER 10