ECON 101: EXAM 1
46 Cards in this Set
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Economics
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study of choices under conditions of scarcity
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Microeconomics
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studies individual behavior
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Macroeconomics
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studies large group behavior
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Factors of Production
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things that produce other things
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Land
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Resources supplied by land
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Labor
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all attributes of humanity. Including skills, strength, and education
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Capital
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plant and equipment used to produce goods and services
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Theory
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An attempt to explain something we observe (a regularity)
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Exogenous variable/Independent Variable
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variables used to explain other variables
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Endogenous variable/Dependent variable
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things a model is attempting to explain
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hypothesis
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an explanation of a relatoin between variables
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Positive analysis
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doing an analysis based on facts
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Normative Analysis
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doing an analysis based on value judgments (norms)
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Production Possibilities Frontier
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something that shows the maximum combo of 2 goods that can be produced with a given set of resources and given technology
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Opportunity cost
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highest valued alternative that must be given up in order to get one additional unit of something
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Increasing Opportunity Cost
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Having to give up an ever increasing amount of one good to get addition units of another
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Decreasing Opportunity Cost
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giving up an ever decreasing amount of one good to get additional units of another
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Constant Opportunity Costs
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Having to give up the same amount of one good to get additional units of another
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Adam Smith
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Discussed the benefits of Markets, wrote "The wealth of Nations"; Laissez Faire
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Specialization of Labor
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Individuals doing a small number of tasks well
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Laissez Faire
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"Leave it alone" - limited role in economic activation
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Autarky
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The absence of trade
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Gains from Specialization
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idea that when individuals specialize and exchange with other, both parties benefit
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Absolute Advantage
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able to produce a good using fewer resources than someone else
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Comparative Advantage
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Producing a good at a lower opportunity cost than someone else
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Relative price
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price of one good compared to all others
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Arbitrage
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take advantage of price differences in different markets to make a risk-free profit
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Traditional Economic System
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answers the what, how, and for whom questions based on the manner in which it has always been done in the past
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Autocratic/Command and Control Economics System
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answers the what, how and for whom questions based on the whims of the bureaucracy/gov/dictator in charge
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Market System
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answers the what, how, and for whom questions through a system of mutually beneficial and voluntary exchange
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Barter
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Exchange of a good for a good
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Perfect Competition
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a market structure where there are many buyers and sellers competing for a good
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Demand
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various quantities of a specific good consumers are willing and able to purchase at various prices
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Law of Demand
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as the price of a good increases, the quantity demanded decreases
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Supply
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the various quantities of a specific good consumers are willing able to purchase at various prices
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Ceteris Paribus
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everything else held constant
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Equilibrium
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a situation from which there is no tendency for change
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Shortage/Excess Demand
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The quantity demanded exceeds the quantity demanded at the given price
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Surplus/Excess Supply
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The quantity supplied exceeds the quantity demanded at the given price
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Substitute
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goods used as alternatives
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Complement
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Goods that are used together as a package
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Normal Good
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a good for which an increase in income leads to an increase in demand
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Inferior Good
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a good for which an increase in income leads to a decrease in demand
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Expectations
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anticipation of what the future holds
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Consumer Surplus
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The difference between a consumers willingness to pay for a good and the amount actually payed
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producer Surplus
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the difference between what a producer receives from selling a good and the cost of producing it
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ECON 101: FINAL