9382719
| Question | Answer |
| What is economics | Economics is the study of scarce resources and the choices we make with the options we have based on the opportunity costs |
| Why is there Scarcity | Our wants are > than our resources |
| Opportunity Cost | The forgone value of the next best alternative |
| What does Oppo cost help us determine | What whom How |
| Comparative Advantage | Who has the lower opportunity cost (You lose out on less on making more goods because you're infrastructure for the other product isn' t there so you can make more without losing much of the forgone value of the next best alternative.) |
| What are resources | Things we used in production. 1. Land 2. Labor 3. Natural Resources |
| Land Utilization Resources vs. Intelligence | Resources can make a country rich but since you can sell one good you will focus in industry and not the people. They become economically weak. A country with little resources can use intelligence and make a strong economy. You need intelligence to make the most of resources |
| Resources - Labor | People that are used to produce a certain product. Labor also has migration patterns and other factors affect it. |
| Technology (economic term) | Way we put things together and mostly shows up as capital goods |
| Capital | Goods or Service that helps produce more goods or services |
| What are the assumptions of S/D | 1. Even distribution Information 2. Identical Goods or Services 3. We only look at S/D curves of one market 4. Many producers and seller (Not many markets meet all assumps) |
| What are the three allocation mechanisms for resources | 1. Markets 2. Command 3. Mixed |
| Allocation Mech - Market | A market is where buyers and sellers can meet at a certain time and place to transfer exclusive and transferable rights of goods. |
| What is a Spot Market | It's a market where buyers and sellers can exchange goods on the spot so you buy at the price or not. No personal connection Ex. Stock Market |
| Liquidity | The ability to turn assets into cash without loss |
| Allocation Mech - Command | A third party (like the Fed) can make decisions and own most resources. They can make decisions for the collective good or self-interest. ex. USSR |
| Sustainability | We have to look at if what we're doing is sustainable socially and for business, we look at static allocation vs. dynamic allocation which looks into the future |
| Exogenous Shock | A variable that is determined outside the system. (Demand and Supplier Shifter in terms of supply and demand) |
| Endogenous Shock | A variable determined within the system. (Ex. would be price in quantity when we look at D/S model) |
| What does exogenous variables do to endogenous variables | An exogenous variable will affect our endogenous variable. Ex. when drought occurs supply will decrease changing how much we want, or the quantity demanded. |
| What are demand shifters (Exogenous Shocks) | 1. Taste and Preference 2. Income 3. Prices of Other goods 4. Number of Consumers |
| What are Supply Shifter (Exogenous Shocks) | 1. Costs of factors of production 2. Number of Sellers 3. Sellers outside options |
| Why is the Demand curve sloping downward (What is the assumption) | Becuase of the Law of diminishing marginal return. When you get another unit of good the amount of utility you receive is less. |
| Why is the Supply curve slope positive (What is the assumption) | Becuase there looking for more profits but they face the law of increasing marginal cost of production. As they produce more it cost more so they have to charge more to get more profit. |
| Exogenous Shocks on Demand - Price of other goods | Substitutes When price increases for one good the demand for another good increase. V.V. Complement When the price of one good increases the demand for another falls. (ex.) Things bought together (hot dogs and buns) |
| Exogenous Shocks on Demand - Income | Normal Good When income rises demand for normal goods rise Inferior Goods When income rises demand for inferior goods decrease |
| What do this mean. (P; pf, R, T) | The P is price and it will be affected by the exogenous shocks like price of factor of production, resources and tech |
| Exogenous Shock - Price of Factors of Production | When the price of FoP increases supply will decrease. V.V. |
| Comparative Statics | Comparing two different equilibrium positions |
| Steps for Comparative statics | 1. Observe the exogenous shocks 2. Which curve is affected 3. Which direction 4. Observe the endogenous shock |
Want to create your own Flashcards for free with GoConqr? Learn more.