Econ exam

Scarcity

resources are limited relative to human

needs and wants

Resources

land, labor, capital

What is produced?

Consumer decides

How is it produced?

Most efficent, cost, producers decide, technology

For whom to produce?

Buying consumers, whoever can pay

Opportunity cost

the value of the next best option

marginal analyisis

comparing incremental (marginal) cost and incremental benefit

Macroeconomics

a branch of economics that studies the behavior of aggregates such as aggregate output, employment, price level, etc. on a national, regional, or international scale.

Microeconomics

a branch of economics that studies the behavior of individual decision-making units (i.e. firms, households, etc.)

positive economics

facts

normative economics

opinions

economic model

hypotheses/did A cause B?

chapter 2

Trade-off

choosing to do something means not choosing to do something else of value

absolute advantage

a producer can produce that good more efficiently than other goods

comparative advantage

a producer can produce that good at a lower opportunity cost

calculate opportunity cost from a given set of production possibilities

find the slope which is the difference in the y value divided by the difference in the x value

constant opportunity cost

the ratio of the opportunity cost is 1 to 1

increasing opportunity cost

The absolute value of the slope of the PPF will increase as the quantity on the x-axis increases

on a PPF curve where is it most efficient

on the curve

an outward shift on the ppc or positive economic growth is caused by

increase in resources or improvements in technology

an inward shift on the ppc or negative economic growth is caused by

decrease in resources

command and control economy

government has control over the economy

Laissez-faire economy

minimal government intervention in a free market

chapter 3

product/output markets

markets when finished goods are traded or exchanged

factor/input markets

markets where factors of production such as land, labor, and capital are traded

demand

Demand is the amount of a product that buyers are able and willing to buy at various prices.

quantity demanded

Quantity demanded is the amount of the product that buyers are able and willing to buy at a specific price.

change in demand

shift of the demand curve

change in quantity demanded

movement along the demand curve

supply

Supply represents the behaviors of sellers in a market

quantity supplied

Quantity supplied is the amount of a product that sellers are able and willing to sell at a specific price.

change in supply

a shift in the supply curve

change in quantity supplied

a movement along the supply curve

market equilibrium

where the demand and supply curves are equal

equilibrium price

the y value of the equilibrium point

equilibrium quantity

the x value of the equilibrium point

surplus

When the market price is above equilibrium

shortage

When the market price is below the equilibrium

chapter 4

price rationing

rationing goods so a shortage appears in the market to reduce quantity demanded and increase quantity supplied till equilibrium is reached

price ceiling

is the legal maximum price that sellers are allowed to charge for a product or service

price floor

legal minimum price set by government that buyers are not allowed to buy lower than

import tariff

is a tax on imported goods

consumer surplus

the difference between the highest price a consumer is willing to pay for a good or service and the market price

producer surplus

the difference between the lowest price a firm would be willing to accept for a good or service and the market price

deadweight loss

the total loss of producer and consumer surplus from underproduction or overproduction