Untitled Flashcards Set

### Unit 1: Introduction to Economics

#### Understanding the World Using Models

1. Economic models - Simplified representations of reality used to analyze economic behavior and predict outcomes.

2. Ceteris paribus - The assumption that all other factors remain constant while examining one variable's effect.

3. Rational choice theory - The principle that consumers aim to maximize satisfaction and firms aim to maximize profits.

4. Production Possibilities Curve (PPC) - A graph showing maximum production combinations of two goods given available resources.

### Unit 2: Microeconomics

#### Demand and Supply

5. Law of Demand - Quantity demanded decreases when price increases, all else equal.

6. Law of Supply - Quantity supplied increases when price increases, all else equal.

7. Equilibrium - The price and quantity where demand equals supply.

8. Veblen goods - Luxury items where demand increases with price due to prestige.

9. Giffen goods - Essential goods where demand increases with price because consumers can't afford alternatives.

#### Elasticities

10. Price Elasticity of Demand (PED) - Percentage change in quantity demanded divided by percentage change in price.((New Quantity - Old Quantity) / Old Quantity) *

11. Income Elasticity of Demand (YED) - Percentage change in quantity demanded divided by percentage change in income.((New Income - Old Income) / Old Income) * 100. 

12. Price Elasticity of Supply (PES) - Percentage change in quantity supplied divided by percentage change in price. ((New Price - Old Price) / Old Price) * 100.

#### Government Intervention

13. Price ceiling - Maximum legal price set below equilibrium, causing shortages.

14. Price floor - Minimum legal price set above equilibrium, causing surpluses.

15. Deadweight loss (DWL) - Lost economic efficiency when equilibrium isn't achieved.

#### Market Failure

16. Negative externality - Costs imposed on third parties not involved in the transaction.

17. Positive externality - Benefits received by third parties not involved in the transaction.

18. Public goods - Goods that are non-excludable and non-rivalrous in consumption.

19. Tragedy of the commons - Overuse of shared resources due to lack of ownership.

#### Behavioral Economics (HL)

20. Nudges - Policy tools that influence behavior without restricting choices.

21. Asymmetric information - Situations where one party has more or better information than another.

### Unit 3: Macroeconomics

#### Economic Activity

22. Gross Domestic Product (GDP) - Total value of final goods and services produced in a country in one year.

23. Unemployment types:

   - Cyclical - Caused by economic downturns

   - Structural - Caused by skills mismatches

24. Inflation - Sustained increase in general price levels:

   - Demand-pull - Too much spending chasing too few goods

   - Cost-push - Rising production costs increase prices

25:Gross national income:is the aggregate value of the gross balances of primary incomes for all sectors. GNI is the gross domestic product, plus net receipts from abroad of compensation of employees, property income and net taxes less subsidies on production.

#### Aggregate Demand & Supply

25. Aggregate Demand (AD) - Total spending in economy: Consumption plus Investment plus Government spending plus Net Exports.

26. Short-run Aggregate Supply (SRAS) - Shows production at different price levels when some costs are fixed.

27. Long-run Aggregate Supply (LRAS) - Shows maximum sustainable output when all resources are fully employed.

28. Stagflation - Combination of high inflation and high unemployment.

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