Mircoeconomics Final

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What is economics?: - Social science (deals with people and the institutions they create)
- Deals with how people make decisions to allocate resources to achieve their goals
Scarcity: -Resources are finite
Economic Goods: - Goods that are limited in supply
- Considered scarce
Economic Efficiency: - Economy is producing efficiently when it cannot increase the economic welfare of anyone without making at least one person worse off
Equity: - The distribution of wealth within a society
Microeconomics: - The branch of economics that deals with the behavior of individual entities, such as consumers, firms, households, or markets
Major focus of Microeconomics: - Price determination
Macroeconomics: - Concerned with the overall performance of the economy (inflation, unemployment, growth)
Post Hoc fallacy: - Occurs when people assume that because one event follows another, the first event caused the second
Fallacy of Composition: - Occurs when we assume that what holds true for part of a system also holds true for the whole
Positive Economics: - Deals with questions that can be analyzed objectively
Normative Economics: - Involves ethical precepts and norms of fairness
Command Economy: - Government makes all important decisions about production and distribution
Market Economy: - An elaborate mechanism for coordinating people, activities, and businesses through a system of prices and markets.
- No single individual or organization is responsible for production, consumption, and distribution
Mixed Economy: - Mix between command and market
- All modern economies
Production Possibilites Frontier: - Shows the possible combinations of two or more goods that an economy could produce with its resources
Opportunity Cost: - Value of items not produced because resources were used for another purpose
Market: - A mechanism by which buyers and sellers interact to determine the price and quantity of a good or service
Market Equilibrium: - A market is in equilibrium when the commodity is neither in glut nor shortage at the prevailing price
The Invisible Hand: - The orderliness of the maket system
- Coined by Adam Smith
Specialization: - Occurs when people or countries can concentrate on the items that can be produced most efficiently
Division of labor: - Allows individuals to perform the tasks they do best
Primary Factors of Production: - Land and labor
Three Main Economic Functions of Government: - Increasing efficency by promoting competition, curbing externalities, and providing public goods
Public Goods: - Commodities that can benefit may people without being used up
- Public schools, parks, highways, national defense
Progressive Taxation: - Higher tax rates ofr higher incomes
Monetary Policy: - Interest rate and money supply
Fiscal Policy: - Taxes and government spending
Factors affecting Demand: - Size of market, income level of consumers, price and availability of related goods, tastes and preferences, special influences
Supply Schedule: - Shows the relationship between the market price and the amount of that commodity that producers are willing and able to produce and sell, other things held constant
Supply Shifters: - Changes in costs of inputs, technological change, government policy, special factors
Supply Increases: - Price Down
- Quantity Up
Supply Decreases: - Price Up
- Quantity Down
Demand Increases: - Price Up
- Quantity Up
- TR Up
Demand Decreases: - Price Down
- Quantity Down
- TR Down
Price Elasticity of Demand: - Measures how much the quantity demanded of a good changes when its own price changes
- Percent change in quantity demanded divided by the percentage change in price
Demand is Price Elastic: - Ed is greater than 1.0
Demand is Price Inelastic: - Ed is less than 1.0
Perfectly Elastic Demand: - Horizontal demand curve
Perfectly Inelastic Demand: - Verticla demand curve
TR and Elasticity: - If demand is Elastic, TR will move in the same direction as quantity
- If demand is inelastic, TR will move in the same direction as price
Elasticity of Supply: - Supply is inelastic if it crosses the horizontal axis
- Supply is elastic if it crosses the vertical axis
- Supply is unitary elastic if it goes through the origin
Taxes and Normal Supply and Demand: - Supply shifts up by the amount of the tax
- Price ries by less than the tax
- The group with the lowest elasticity pays the greater share of the tax
Taxes and Pefectly Inelastic Demand: - Price rises by full amount of tax. Consumers pay all
Taxes and Perfecty Elastic Demand: - Price doesn't rice at all. Producers pay all
Taxes and Perfectly Elastic Supply: - Price rises by full amount of tax. Consumers pay all
Taxes and Perfectly Inelastic Supply: - Price doesn't change at all. Producers pay all.
Price Floor: - Legally set minimum price. Price floors above market equilibrium lead to surpluses
Price Ceilings: - Legally set maximum price. Price ceilings below market equilibrium lead to shortages
Utility: - The satisfaction consumers derive from goods and services
Indifference Curve: - Shows the combinations of two ore more products that would provide equal satisfaction to a consumer
Point of Tangency: - The consumer's choice is the point where the budget constraint is just tangent to the highest attainable indifference curve
Consumer Surplus: - The area above the price line and below the demand curve
Production Function: - Relates inputs to output in physical terms
Total Product: - Output
Average Product: - Divid total product by the input level
Marginal Product: - Tells you how much extra output you get form each unit of extra unit of input
- Take the change in total product and divide by the change in input

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Number of cards 57