Microeconomics chapters 1-4 study guide – Flashcards
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social science that studies how society chooses to allocate scarcity resources.
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Economics
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social science that studies decission making by individuals, household, business firms, and industry.
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Microeconomics
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transportation communication information
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Globalization divides in
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because scarcity exists.
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What is the reason we study economics?
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WHAT to produce HOW to produce For WHOM
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What are the 3 questions every economy have to answer?
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Goods and services (Gross Domestic Product "GDP")
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what to produce?
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Is all the final goods and services produced in a nation in a given period of time.
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Gross Domestic Product
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Using the factors of prduction ( which are the inputs for which we produce outputs (GDP).
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How to produce?
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Land Labor Capital Entrepreneurship
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Name the Factors of production ?
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Natural resources used to produce goods and services.
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Land
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oil, rivers, farm land, rocks, soil, gas.
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give an example of Land
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Work time and effort people devote to produce goods and services. ( Work effort and Human capital)
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Labor
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Physical tools and equipment.
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Capital
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tools, instruments, buildings, machinery, etc...
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Example of capital
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human resource that organizes the other factors of productions to produce goods and services. Take risks.
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Entrepreneurship
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Skill sets and education.
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Human capital
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doctors, plumbers, auto mechanics, electricians, etc... (people with a degree, certification and knowledge).
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Example of human capital
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simplification of reality
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Models
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Explain Predict Understand
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what are the 3 characteristics models need to have to work?
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The best foregone alternative we give up when we make a decision.
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Opportunity cost
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As you produce more of a good, the opportunity cost of another good increases.
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Law of Increasing Opportunity Cost
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- All points are posible -Any point between the curve are possibles -Points on the PPC are attainable
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Production Posibility Curve (PPC)
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Possible
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Attainable
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When producing as much as you can.
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Efficient
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Economic growth,
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It increases our quality of life?
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because uses the Scientific Method
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Why economics is the only social science in receive the nobel prize?
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1. Identify problem 2. Develop Hypothesis 3. Gather data 4. Test hypothesis
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Scientific Method stages
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1. Ceteris paribus 2. association 3. Fallacy of composition 4. nature of subject matter
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Problems with economics as a social science
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Free will
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Volition
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Volition
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Free will
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A point determined by the PRICE of a good.
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What is Quantity demanded (Q)
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A line, curve or schedule
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What is Demand (D)
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Negative relationship between quantity Demanded and Price.
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Law of Demand
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price
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What changes Quantity demanded?
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Right→
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When demand increases it shifts to the _____?
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Product or service
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Widget
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Left←
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When demand Decreases it shifts to the _____?
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Right →
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When supply increases it shifts to the _____?
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- Tastes and preferences - Population and # of buyers - Income - Price of related goods
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What shifts de demand curve?
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1-Technology 2- Price and availability of inputs 3- # of sellers 4- Expectations 5- Everything else
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What shifts the Supply curve?
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when income increases, Demand increases.
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Normal good in the demand
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When income increases, Demand decreases
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Inferior good in the demand
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is a point in the supply curve dertermined by the PRICE of the good.
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Quantity Supply (Qs)
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A line curve or schedule
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What is Supply
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direct relationship between Quantity supplied and Price
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Law of Supply
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Price ↑ then Qs ↑ Price ↓ then Qs ↓
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Law of Supply states
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Price ↑ then Qd ↓ Price ↓ then Qd ↑
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Law of Demand states
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Price
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What changes quantity supply
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Supply increase ↑
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What happen to the supply curve when technology increase in the production of a good?
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Supply increase ↑
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What happens to the supply curve when the number of sellers increase?
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Qs is greater than Qd
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Surplus
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Qd is greater than Qs
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Shortage
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Sellers determine the supply Buyers determine the demand
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What determines supply and demand?
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Surplus
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Puts down preasure on the price; which means price goes down.
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Price
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What supply and demand determine in a market economy?
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Equilibrium
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A point Where QS and Qd meet?
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International trade, or production of components and services by the firm in other country.
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globalization
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Lower the cost of production and make the product accessible to more people.
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globalization target
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and exchange--giving up one thing to get somethig else.
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Trade off
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1. Trade off 2.rational choices 3.benefit 3. Cost 4.how much choice made at the margin 5. choices respond to incentives.
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6 ideas that define the economic way of thinking?
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A good that is consumed WITH another good.
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complement good
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A good that can be consumed IN PLACE of another good
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substitute good
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sum of the supplies of all the sellers in the market.
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Market supply
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represented by movement along the supply curve.
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what is a change in Qs ?
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a shift to a new supply curve.
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what is change in supply?
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other things remaining the same or "other things being equal"
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ceteris paribus
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Foregone production of goods and services
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the opportunity cost to a country of having unemployed factor of production is?
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-makes a statement about how the world operates. -can be tested against the facts.
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a positive statement
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how people make choices to cope wit Scarcity
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economics is the social science that studies
