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ECON 2105: Exam 1
Scarcity
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Limited nature of society's Natural resources
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Economics
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the social science that analyzes the production, distribution, and consumption of goods and services.
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Efficiency
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means that society is getting the maximum benefits from its scarce resources
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Equality
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Means that those benefits are distributed uniformly among society's members
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Opportunity cost
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The cost of what you give up to gain another item
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incentive
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is something that induces a person to act
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Marginal Cost
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the change in the total cost that arises when the quantity produced changes by one unit.
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Marginal Change
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a small incremental adjustment to a plan of action
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Market Economy
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The decisions of a central planner are replaced by the decisions of millions of firms and household
no Government control
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Property Rights
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The ability of an individual to own and excersize control over scarce resources
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Market Failure
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a term used to refer to a situation in which the market on its own fails to produce an efficient allocations of resources
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Externality
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the impact of one person's actions on the well being of a bystander
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Market Power
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a term that refers to the ability of a single person for small group to unduly influence market price
owner of a well when the water is scarce
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productivity
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the amount of goods and services produced from each unit of labor input
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Inflation
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a rise in the general level of prices of goods and services in an economy over a period of time.
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The growth in the overall quantity of money
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What causes inflation?
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Business cycle
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The irregular and largely unpredictable fluctuations in economic activity as measured by the production of goods and services or the number of people employed
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production possibility frontier
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a graph that shows the various combinations of amounts of two commodities that could be produced using the same fixed total amount of each of the factors of production.
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Microeconomics
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a branch of economics that studies the behavior of individual households and firms in making decisions on the allocation of limited resources (see scarcity).
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macroeconomics
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a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets.
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Positive Statement
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minimum wage laws cause unemployment
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Normative Statement
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The government should raise the minimum wage
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absolute Advantage
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A term that refers to the ability of a party to produce more of a good or service than competitors, using the same amount of resources.
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Opportunity Cost
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A term
you can produce this amount of potatoes but you can only produce this amount of oranges
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Market
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A group of buyers and sellers of a particular good or service
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NonCompetitive Market
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Toppers , one of three pizzeria's downtown, plans to lower there prices to but out the competition
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Competitive Market
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Flower, one company in more than a thousand other companies, plans to lower prices in hope to but out competition
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Law of Demand
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the claim that, other things equal the quantity demanded of a good falls when the price of the good rises
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normal good
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any goods for which demand increases when income increases and falls when income decreases but price remains constant, i.e.
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inferior good
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a good that decreases in demand when consumer income rises, unlike normal goods, for which the opposite is observed.
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Demand curve shift
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Income
What kind of shift
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demand curve shift
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Prices of Related goods
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demand curve shift
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Tastes
If you like it you want it
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demand curve shift
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Expectations
Your expectations of future income
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demand curve shift
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number of buyers
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demand curve shift
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Price of Related goods
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When a fall in the price of one good reduces the demand for another good
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Substitutes
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A pair of goods that are used in place of each other
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Number of buyers
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If peter joins nicholas and catherine as another consumer of ice cream what is this an example of
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Movement ALONG the demand curve
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overall change in prices that affects the demand
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Shift in the demand curve
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1-Change in the number of consumers in the market for a product,
2-Change in consumer tastes and preferences for a product,
3-Change in consumer income,
4-Change in the price of related goods—complements or substitutes of a product.
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quantity supplied
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the amount that sellers are willing and able to sell
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law of supply
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Other things equal, when the price of a good rises , the quantity supplied of the good also rises and when the price falls the quantity supplied falls as well
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Shift in Supply |
Input prices
All the things that come together to create a supply
If the cream in ice cream rises its price the supply of the supplied icecream drops
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Input Prices
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Shift in supply
When the prices of the ingredients raises less quantitiy supplied
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Shift in supply |
Technology
The technology for turning inputs into the final product also has to do with quantity supplied
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Shift in supply
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expectations
If a firm knows that the price of ice cream is set to rise they will put most their ice cream in storage and supply less to the market today
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Shift in supply
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Number of sellers
If ben and jerry were to retire from the icecream business the supply would fall
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equilibrium
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The one point at which the supply and demand curves intersect
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Equilibrium Price
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a state of the world where economic forces are balanced and in the absence of external influences the values of economic variables will not change.
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surplus
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When there is an excess supply of a product. Prices are driven down by this.
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Shortage
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a term describing a disparity between the amount demanded for a product or service and the amount supplied in a market.
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law of supply and demand
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an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium for price and quantity.
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Taste
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When there is hot weather people want to buy more ice cream what is demand shifter called
Supply isn't changed because the firm doesn't care that the weather changed
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Input
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A hurricane destroys the sugar cane crop and drives up the price of sugar which lowers the amount of ice cream produced
The increase in the price of ice cream doesnt directly affect the buyers decision to buy so what kind of supply shifter is this
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Tax incidence
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this terms refers to how the burden of a tax is distributed among the various people who make up the economy
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Gross domestic production
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measures the flow of money through a nation
The market value of ALL FINAL GOODS AND SERVICES produced within a country in a given period of time
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This is counted by Gdp
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housing rental payments
Tenants expenditure = landlords income
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How to Calculate GdP
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Consumption
Investment
Government Purchases
Net Exports - Net imports
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Transfer Payment
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Not included in GDP
Government giving social security benefits
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Real GDP
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calculating the price of goods and services as they change over time
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Nominal GdP
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the production of goods and services valued at a current price
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The GDP deflator
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measures the current level of prices relative to the level of prices in the base year
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