Micro Test 1 2
Terms
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- Economics
- deals with scarce resources
- Macro
- Economy Wide Variables
- Micro
- Small part of the economy
- Captalist
- Rasies the standard of living (Democracy)
- Positive Statement
- You can test it
- Normative Statement
- Opinions
- False Positive
- test a positive statement and it is wrong
- Self-Interest Hypothesis
- Individuals are interested in satisfying themselves
- Ceterus Perivus
- Hold everything constant except for 2 variables
- Cause Effect
- Just because 2 things happen together, there is no relation (tubing & bankruptcy)
- Falacy of Compesition
- Just because something is true for 1 thing, it isnt true for everything
- Land
- coal, oil, water
- Labor
- workers
- Capital
- Factories, Machines
- Demand
- willing and able to pay
- Law of demand
- as price Increases, Quanity demanded decreases
- Increase in Qd=
- decrease in price
- Increase in Demand=
- Price doesnt make demand change
- Normal Demand
- Same relationship (+ income = +BMW's)
- Inferior Demand
- Opposite relationship (+income= -Ramon Noodles)
- Determinants of Demand
- income, population, taste/preferences, change in related goods)
- Complimentary
- effects one another (Gas/H2)
- Substitues
- Price of Pepsi + = Coke demand +
- Supply
- As price increase, Qaunity supply increases
- Determinants of Supply
- Technology, Number of Suppliers, Change in Price of imput, Change in price of related good
- Equilibrium
- Supply and demand cross
- If a pipe line broke...
- Decrease in supply = increase in price = decrease of quantity demanded
- An earthquake in relationship to water...
- increase in demand = decrease in supply = increase in price
- Price Floor
- Price cant go below = Surplus
- Price Ceiling
- Price cant go above = Shortage
- Elastic
- More sensative (increase in syrup...changes pancakes) a number like 3.2%
- Inelastic
- Not sensative (increase price in cig... wont change much) a number like 1%
- Elastiicy of Demand
- % change quantity demand / % change price
- Elasticicy of Income
- % change in demand / % change income
- Elasticy of Price
- % change in Demand X / % change in Price Y
- Law of Diminishing Marginal Utility
- The satisfaction decreases
- opportunity costs
- highest valued alternative that must be chosen
- Tradeoff
- giving one good up to obtain some other good
- Comparative advantage
- ability of one to do something with a lower opportunity cost than another
- Relative Price
- price of an exchange
- Inferior Goods
- More expensive item Cambells vs Ramon
- Law of Supply
- As the price of a good increases, the quantity supplied increases