Macroeconomic Concepts

These flashcards cover the essential macroeconomic concepts discussed in the lecture.

What is scarcity in economics?

Scarcity is the fundamental problem we have in economics, defined as the inability of scarce resources to satisfy human wants.

What indicates that a resource is scarce?

If a resource has a positive price, it is considered scarce.

How is opportunity cost defined?

Opportunity cost is the cost of the next best alternative that is forgone when making a decision.

What do production possibilities curves illustrate?

Production possibilities curves illustrate the maximum combinations of two different goods that can be produced with fixed resources.

What does a bowed-out production possibilities curve indicate?

It indicates increasing opportunity costs, meaning that resources are not perfectly adaptable for the production of both goods.

What is absolute advantage?

Absolute advantage is the ability to produce more of a good or service using fewer resources than another producer.

What is comparative advantage?

Comparative advantage is the ability to produce something at a lower opportunity cost than another producer.

What can cause a rightward shift in demand?

An increase in consumer tastes, market size, or income can cause a rightward shift in demand.

How does price affect demand?

Price changes quantity demanded, not demand itself.

What are complements in terms of goods?

Complements are goods that are typically used together; when the price of one goes up, the demand for the other goes down.

What directly affects a supply curve?

Factors like input prices, number of sellers, technology, and producer expectations directly affect supply.

What happens to market equilibrium when there is an increase in demand?

An increase in demand causes both the equilibrium price and equilibrium quantity to increase.

What does a leftward shift of the supply curve indicate?

A leftward shift indicates a decrease in supply, resulting in lower quantities supplied at every price.

How can double shifts in the supply and demand curves affect equilibrium?

In double shifts, the equilibrium price may be determined while the equilibrium quantity can be indeterminate, depending on the size and direction of the shifts.

What effect does government regulation typically have on supply?

Government regulation generally decreases supply.

What is a key distinction between changes in demand and changes in quantity demanded?

Changes in demand are shifts of the demand curve itself, while changes in quantity demanded are movements along the curve due to price changes.