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Econ 2010 Midterm 1 Terms
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Marginal changes
Small incremental changes to a plan of action
Economics
Study of how society manages its scarce resources
Market economy
Economy that allocates resources through dercentralized decisions of many firms and households as they interact in markets for goods and services
Property rights
Ability of individual to own and excercise control over scarce resources
Market failure
Situation in which a market left on its own fails to allocate resoyrces efficiently
Externality
Impact of one person's actions on the well-being of a bystander
Market power
Ability of single person/grupp to have substantial influence on market prices
Productivity
Quantity of goods and services produced from each unit of labor
Business cycle
Fluctuations in econ activity such as employment and production
Inflation
Increase in overall level of prices in economy
Positive statements
How world is
Normative statements
How world should be
Feasible on PPF
On and inside
Efficient on PPF
On
Opportunity cost
Negative slope of PPF
PPF Bowed Out
Econ is increasing
Resources change. PPF?
Shift up/down. Slope is constant.
Absolute advantage
Use less resources to produce same amt. Indicates how country's econ will do. Doesn't explain how trade will occur.
Comparative advantage
Ability to produce at lower OC. In trade, each country will specialize in product with CA.
Market
Buyers and sellers of a good or service
Competitive market
No single buyer/seller can influence market outcome
Perfectly competitive market
Many buyers and sellers. No single individual can influence price. Free entry/exit. No difference in product quality.
Law of Demand
As price increases, demand decreases
Inverse demand function
P = a - bQd
Demand function
Qd = c - bP
Demand shifters
Income
Price or related goods
Taste
Expectations
Number of buyers
Supply function
Q = a + bP
Inverse supply function
P = c + dQ
Supply shifters
Price of inputs
Tech
Expectations
Number of sellers
Equilibrium
Market price has reached Qs = Qd
Elasticity
Responsiveness of Qd and Qs to one of their determinants
Elasticity determinants
Availability of subs
Neccessities v luxuries
Definition of market
Time horizon
Elasticity is usually
Negative
Inelastic (demand)
Ed < 1
Income elasticity of demand
Qd / I
Cross-price elasticity
Qd / P
Price elasticity of supply
Qs / P
Inelastic (supply)
Es < 1
Price ceiling
Legal max on price
Price floor
Legal min on price
Per unit tax
For each unit sold, t dollars given to govt
Welfare economics
Study of how allocation of resources affects economic well-being
Willingness to pay
Max amt a buyer will pay
Consumer surplus
WTP - price
Cost
Value of everything (ie time) needed to produce a good
Producer surplus
Price - cost
Dead weight loss
Fall in total surplus that results from market distortion
Author
sherieberry
ID
40123
Card Set
Econ 2010 Midterm 1 Terms
Description
Econ 2010 Fall 2010 Midterm 1 Terms
Updated
2010-10-06T05:39:58Z
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