Bing Ma Econ Microeconomic 101 ( Chapters 1,2,3)

Microeconomic

The branch of economics that examines the functioning of
individual industries and the behavior of individual decision-making units—that is,
firms and households.

Sony is debating whether to set the cost of the
new PS6 at $499 or $599; The effect of changing input prices on Costco’s sale of
Milk

Microeconomic

Macroeconomic:

The branch of economics that examines the economic behavior of
aggregates—income, employment, output, and so on—on a national scale.

Morocco’s inflation rate increased to 5.2%; Effect of decreased
consumption on Finland’s GDP

Macroeconomic

Empirical Economics

The collection and use of data to test economic theories.

Opportunity Cost

The best alternative that we forgo, or give up, when we make a choice or a decision

Normative Economics

An approach to economics that analyzes outcomes of
economic behavior, evaluates them as good or bad, and may prescribe courses of
action. Also called policy economics.

the minimum wage is beneficial to society and should be maintained in order set a baseline standard of living

Normative Economics

Positive Economics:

An approach to economics that seeks to understand behavior and
the operation of systems without making judgments. It describes what exists and how
it works.

A 2% decrease in the minimum wage causes a 0.7% decrease
in national unemployment.

Positive Economics:

Ceteris Paribus

or all else equal: A device used to analyze the relationship between two variables
while the values of other variables are held unchanged.

Efficiency:

In economics, allocative efficiency. An efficient economy is one that
produces what people want at the least possible cost

Equity:

Fairness.

Economic Growth:

An increase in the total output of an economy.

Stability

A condition in which national output is growing steadily, with low inflation
and full employment of resources.

Absolute Advantage:

A producer has an absolute advantage over another in the
production of a good or service if he or she can produce that product using fewer
resources (a lower absolute cost per unit).

Comparative Advantage

A producer has a comparative advantage over another in the
production of a good or service if he or she can produce that product at a lower
opportunity cost.

Production Possibilities Frontier

A graph that shows all the combinations of
goods and services that can be produced if all of society’s resources are used
efficiently.

Marginal Rate of Transformation (MRT):

The slope of the production possibility
frontier (PPF).

. Law of Increasing Opportunity Cost

The concave shape of the production
possibility frontier (PPF) curve reflects the law of
increasing opportunity cos.
- As we increase the production of one good,
we sacrifice progressively more of the other.

Behavioral Economics

uses psychological theories relating to emotions and social context to help
understand economic decision making and policy. Much of the work in
behavioral economics focuses on the biases that individuals have that affect
the decisions they make.

Comparative economic systems

examines the ways alternative economic systems function. What are the advantages and disadvantages of different systems?

Econometrics

applies statistical techniques and data to economic problems in an effort to test hypotheses and theories. Most schools require economics majors to take at least one course in statistics or econometrics.

Economic development

focuses on the problems of low-income countries. What can be done to
promote development in these nations? Important concerns of development for economists include population growth and control, provision for basic needs, and strategies for international trade.

Economic history

traces the development of the modern economy. What economic and political events and scientific advances caused the Industrial Revolution?

What explains the tremendous growth and progress of post-World War II Japan?
What caused the Great Depression of the 1930s?

Environmental economics

studies the potential failure of the market system to account fully for the
impacts of production and consumption on the environment and on natural resource depletion. Have alternative public policies and new economic institutions been effective in correcting these potential failures.

Finance

examines the ways in which households and firms actually pay for, or
finance, their purchases. It involves the study of capital markets (including the stock and bond markets), futures and options, capital budgeting, and asset valuation.

Health economics

analyzes the health care system and its players: government, insurers, health care providers, and patients. It provides insight into the demand for medicalcare, health insurance markets, cost-controlling insurance plans (HMOs,PPOs, IPAs), government health care programs (Medicare and Medicaid), variations in medical practice, medical malpractice, competition versus regulation, and national health care reform.

The history of economic thought

which is grounded in philosophy, studies the development of economic ideas and theories over time, from Adam Smith in the eighteenth century to the works of economists such as Thomas Malthus, Karl Marx, and John Maynard Keynes. Because economic theory is constantly developing and changing, studying the history of ideas helps give meaning to modern theory and puts it in perspective.

Industrial organization

looks carefully at the structure and performance of industries and firms within an economy. How do businesses compete? Who gains and who loses?

International economics

studies trade flows among countries and international financial institutions. What are the advantages and disadvantages for a country that allows its citizens to buy and sell freely in world markets? Why is the dollar strong or weak?

Labor economics

deals with the factors that determine wage rates, employment, and
unemployment. How do people decide whether to work, how much to work, and at what kind of job? How have the roles of unions and management changed in recent years?

Law and economics

analyzes the economic function of legal rules and institutions. How does the law change the behavior of individuals and businesses? Do different liability rules make accidents and injuries more or less likely?What are the economic costs of crime?

Public economics

examines the role of government in the economy. What are the economic functions of government, and what should they be? How should the government finance the services that it provides? What kinds of government programs should confront the problems of poverty, unemployment, and pollution? What problems does government involvement create?

Urban and regional
economics

studies the spatial arrangement of economic activity. Why do we have cities? Why are manufacturing firms locating farther and farther from the center of urban areas? The Diverse Fields of Economics

Demand:

The negative relationship between price and quantity demanded: As price
rises, quantity demanded decreases; as price falls, quantity demanded increases.

Quantity Demand

The amount (number of units) of a product that a household would
buy in a given period if it could buy all it wanted at the current market price.

Supply:

The positive relationship between price and quantity of a good supplied: An
increase in market price will lead to an increase in quantity supplied, and a decrease
in market price will lead to a decrease in quantity supplied.

Quantity Supply:

he amount of a particular product that a firm would be willing and
able to offer for sale at a particular price during a given time period

Substitute Good

Goods that can serve as replacements for one another; when the
price of one increase, demand for the other increases.

Complement Good

Goods that “go together”; a decrease in the price of one result in
an increase in demand for the other and vice versa

Normal Good

Goods for which demand goes up when income is higher and for which
demand goes down when income is lower

Inferior Good

Goods for which demand tends to fall when income rises.

Shortage

The condition that exists when quantity demanded exceeds
quantity supplied at the current price

Surplus

The condition that exists when quantity supplied exceeds
quantity demanded at the current price