LUBS 1950

Pregunta	Respuesta
budget line	a subset of the feasible set
opportunity cost	the best next alternative foregone
axioms	completeness transitive rational choice non satiation continuous convex
marginal rate of substitution	the gradient of the indifference curve
mrs of b for a	change in qty b/ change in qty a
substitution effect	a price increase causes demand to fall negative relationship! always substitute to a relatively cheaper good
income effect	when price increases real income falls. if the fall causes demand to fall then the IE is positive if the fall causes demand to increase then the IE is negative
the role of markets	to allocate resources and coordinate buyers and sellers
exogenous variables in supply and demand	tastes and preferences
endogenous variables in supply and demand	price and quantity
production	turning an input into an output
production function	maximum output with available inputs
average physical product of labour	total physical product / total labour input
marginal physical product	the addition to total output by adding one more unit of input with all other inputs fixed
total product curves	represents the total amount of output that a firm can produce with a given amount of labour
isocost	a line which shows all of the unit combinations that cost a given amount
profit	total revenue - total cost
avg revenue	total revenue / quantity
if the avg cost is falling marginal cost is below it	if the avg cost is rising, marginal cost is above it
economic efficiency	no technical or x inefficiency
production possibility frontier	all points on the PPF are production efficient movement along the PPF is caused by a shift in output mix
endowment point	initial allocation of goods given and produced
the contact curve	the set of allocations of commodities to traders such that no reallocation can make everyone better off
pareto optimality	a state where there is no other feasible set where at least one person would be better off and no one would be worse off
issues of pareto optimality	non satiation getting happy from doing bad poor judgement (kids, elderly) speciesm (exploiting animals) distributive justice defence of status quo
internal costs	costs that are covered by the firm
external costs	costs that aren't covered by the firm
injections to the circular flow of income	exports investment
leakages to the circular flow of income	imports savings
GDP	the value of the level of economic activity in an economy in a given year
nominal GDP	measures the current value of output
real GDP	measures the amount of output valued at constant prices
the GDP deflator	nominal GDP / real GDP
GNP	the total income of nationals earned domestically and abroad
net national product	GDP - depreciation
genuine progress indicator	accounts for the value of social human and natural capital as well as normal indicators of progression
says law	a person gets paid for production and then uses this income to spend on other products
the business cycle	peak / boom recession / contraction trough / recession expansion
capacity	the economy's ability to produce goods and services
crowding in	an increase in investment leads to and increase in expenditure and income
fiscal policy	the use of expenditure and taxes to control the economy
expansionary fiscal policy	increase gvt expenditure reduce taxation
commodity money	intrinsic value, gold silver
flat money	no intrinsic value, coins
m0	notes and coins
m1	current account in commercial banks + m0
m2	deposit account + m1
m3	repurchase agreements, money, market shares and paper + m2
m4	private sector holdings, sterling, deposits + m3
demands	transactionary demand: day to day precautionary demand: rainy day speculative demand: for an opportunity
monetary policy	the changing of interest rates to influence aggregate demand
phillips curve	shows the negative relationship between employment and inflation
NAIRU	non accelerating inflation rate of unemployment: the unemployment rate at which inflation doesn't change over time
long run phillips curve	shows relationship between employment and inflation after expectations of inflation have been adjusted
mark up	p = (m)c c is average cost
balance of payments on financial account	difference between sale of assets to foreigners and purchase of assets in a time period
balance of payments on current account	includes b of p on goods and services with balances on factor income and transfers
net flow from private sectir	balance between investment and savings
net flow for the government	difference between expenditure and tax
net flow for overseas sector	the difference between exports and imports and the net income of factor services exported abroad
if e < 1	inelastic: p increases d falls but less than the increase in price
if e > 1	elastic: p increases d falls but more than the increase in price
investment	taken at present cost with hope of benefitting in future
indicators of economic activity	long leading: contract permits shorter leading: consumer surveys

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