Economics Key Concepts: Scarcity, Markets, and Tradeoffs

What is scarcity?

A situation in which unlimited wants exceed the limited resources available to fulfill those wants

What is ECONOMICS the study of?

its the study of the chouces people make to attain their goals, given their scarce resources

Three Key Econ ideas

1. People are rational

2. People respond to economic incentives

3. Optimal decisions are made at the margin

What is a MARKET?

group of buyers

Because of scarcity what are tradeoffs

Idea, scarcity, providing more of one good means less of something else

What is a Centrally planned economy

Economy in which the government decides how economic resources will be allocated

what is a Market Economy

Economy in which decisions of house and firms decide the allocation of economic resources

What countries are a planned economy?

1. China

2. North Korea

3. Cuba

What economy is the US described as?

its more accurate to describe the US as a Mixed economy

What is a Modern "Mixed" economy?

Economy in which ecnomic decisions result from the interaction of buyers and sellers in markets but in which Gov't plays a role in allocation of resources

What is Positive analysis?

analysis concerned with what it is

What is normative analysis?

Analysis concerned with what it ought to be

What is micro econ the study of?

how households and firms make choices

-how they interact in markets

-how the government attempts to influence their choices

What is macro econ the study of?

Study of econ as a whole, including topics of

-inflation

-unemployment

-and econ growth

CH2

What is the Production possibility frontier?

It shows the possibility of most produced

What happens when increasing marginal Opp Cost

The more resources already devoted to an activity, the smaller the payoff to devoting additional resources to that activity

What happens when economic resources become available

the economy can move from A --> B

What is economic growth

The ability of the economy to increase the production of goods and services

Absolute Advantage

The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost

Comparative advantage

the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors

What is the basis for trade

comparative advantage is not absolute advantage

What is a market

a group of buyers and sellers

Four Factors of production

land, labor, capital, entrepreneurship

What did Adam Smith do?

Argued for free markets in his 1776 book "An inquiry into the Nature and Causes of the Wealth of nations"

What is a free market

One with few Gov't restrictions

What is the invisible hand

It allows the individual response collectively end up satisfying the wants of consumers

I want the government to protect my priv property

....

What is a perfect Competitive market

a market with

1.many buyers and seller

2. all firms

What is Quantity demanded

the amount of a good or service that a customer is willing to spend

Law of demand

Rule that holding everything constant, when the price of a product falls, the quantity demanded of the product will increase

What is a demand schedule?

a table that shows the relationship between the price of a good and the quantity demanded

what is the demand curve

a graph of the relationship between the price of a good and the quantity demanded

What explains the law of demand

1. consumers SUBSTITUTE toward the good whos price has fallen(substitute effect)

2. consumers have more purchasing power, which is almost an increase to income(income effect)

What does Ceteris Paribus mean

all else equal

What are some variables the shift market demand

1. income

2. price of related goods

What are examples of normal goods

1. new clothes

2. vacations

What are examples of inferior goods

1. Second hand clothes

2. ramen

What is change of demand

Situation in which change in the marketplace prompts consumers to buy different amounts of goods or services at every price.

what is change in quantity demanded

a change in the amount of a product that consumers will buy because of a change in price

what is quantity supplied

the amount of a good that sellers are willing and able to sell

what shifts market supplies

Market supplies shift due to changes in non-price factors, including input prices, the availability and cost of resources, technology, government policies

What is Market Equilibrium

Quantity demanded = quantity supplied

Look at table 3.3 ch3 notes

CH 5

Health care

Goods and service, prescription drugs, surgeries, treatments

What happens with medical advances

it helps with prevention and treatments are reducing death rates

What is health insurance

contract with monthly payment

Free-For-Service

insurance payments take the form of Free-For-Service where doctors and hospitals receive payment for each service they provide

What is HMO (health maintenance organization)

Where doctors receive flat fee per patient

in 2021 what percent of people received health insurance through their employed

49%

What did the Affordable Care act attempt to do

It attempted to lower health care insurance

Peoples dont have insurance Because...

1.older people use health care more than young people

2. healthy people dont need it

3. cost exceed benefit

What is a Single payer health system and what country uses it

Canada- Gov't provides health insurance to all people funded through taxes, annual fee 744

What is universal health care and what country has it

Japan - Every resident required to enroll in nonprofit health insurance, they dont pay for preventative health care

What is socialized medicine and who uses it

UK- health care system under which Gov't owns most hospitals and employs doctors, 13% supplement with priv health care

What is Symmetric information

Where consumers and producers have access to the same information about a good or service in a market.

What is asymmetric information?

one party to a transaction has more information than the other

What can asymmetric information lead to?

it can lead to market failure

What is Adverse selection

It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

What is risk averse

wanting to avoid risks

What is an alternative way around the adverse selection

mandate that individuals carry insurance, repealed in 2017

What is moral hazard

refers to actions people take after entering into a transaction, that make the other party to the transactions worse off

What is the principle agent problem

a problem arises when an employee decides or acts on behalf of the employer/owner but has personal incentives that dont align with the employer/owner

When was the Affordable care act passed

2010 by congress

true or false: the US spends more on health care per person than any other country

true

Malpractice lawsuits

1%

Uninsured patient cost

1-4%

what does the ACA include?

1. Individual mandate

2.State health insurance market places

3. employer mandate

4. regulation of health insurance

5. expansion of medicade eligibility

6. increased taxes