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62 Cards in this Set
- Front
- Back
Economics |
The study of the use of scarce resources to satisfy unlimited human wants |
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Factors of Production (and divisions) |
Resources used to produce goods and service. Divided into three broad categories of: land, labour and capital. |
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Scarcity |
Implies that choices must be made and making choices implies the existence of cost. |
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Opportunity Cost |
The value of the next best alternative that is forgone when one alternative is chosen. |
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Production Possibilities Boundary illustrates what 3 concepts? |
1. Scarcity: unattainable combinations outside boundary 2. Choice: the need to choose among the alternative attainable points along the boundary. 3. Opportunity Cost: the negative slope of the boundary implies increasing or constant opportunity cost. |
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4 key economic problems: |
Resource allocation: What is produced and how? What is consumed and by whom? (Distribution) Why are resources sometimes idle? Is productive capacity growing? |
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Microeconomics |
The study of the causes and consequences of the allocation of resources as it is affected by the workings of the price system. |
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Macroeconomics |
The study of the determination of economic aggregates such as total output, employment and growth. |
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The nature of market economies |
Self organising, efficiency, incentives and self interest. |
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Decisions makers in markets |
Consumers(households), producers(firms) and governments. |
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Maximizing decisions |
People are maximizers. Selling labour and buying product making choices to maximize their utility (well being) |
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Marginal decisions |
Comparing the marginal cost of something (ex. Price of shirt) with the marginal benefit you'll receive (extra satisfaction of having new shirt) "at the margin" |
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Factor Markets |
Individuals sell the services of the factor that they own. Including labour and goods market. |
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Specialization of Labour |
The specialization of individual workers in the production of particular goods and services. |
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Division of Labour |
The breaking up of a production process into a service of specialized tasks, each done by a different worker. (Specialization within the production of a product) |
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Barter |
An economic system in which goods and services are traded directly for other goods and services. Requires a double coincidence of wants for successful barter transaction. |
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Types of economic system |
Traditional Economy, Command (Centralized) Economy, Free-Market Economy and Mixed Economy |
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Quantity Demanded |
The amount of a good or service that consumers want to purchase during some time period Quantity bought: actually bought |
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Flows |
Q of __, expressed as so much per time period. |
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Ceteris Paribus |
Hold all variables constant when testing 1 variable. "Other things being equal" |
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Stock |
Variable has a meaning at a point in time |
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Law of Demand |
For any general need, there are almost always many different products |
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Demand Schedule |
A table showing the relationship between quantity demanded and the price of a commodity, ceteris paribus |
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Demand Curve |
The graphical representation of the relation between quantity demanded and the price of a commodity ceteris paribus |
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Price and demand are related |
Negatively |
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Demand |
The entire relationship between the quantity of a commodity that buyers want to purchase and the price of the commodity ceteris paribus. |
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How to shift demand curve? |
A change in any of the variables (other than the products own price) that affect the quantity demanded will shift the demand curve to a new position. Consumer income change >> purchasing of normal and inferior goods, substitute and complement product price changes |
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Normal goods |
demand increases when income rises |
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Inferior goods |
Demand falls when income rises |
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Excess Demand |
A situation in which at the price given, quantity demanded exceeds quantity supplied |
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Excess Supply |
A situation in which, at the given price, quantity supplied exceeds quantity demanded. |
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3 conditions for a model to apply to a product (apples not i phones) |
1. Many consumers of product 2. Many producers of product 3. Homogenous versions of product |
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Equilibrium Price |
The price at which quantity demanded = quantity supplied. "Market clearing price" Once established it will persist until disturbed. |
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Disequilibrium Price |
Quantity demanded doesn't equal quantity supplied |
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Disequilibrium |
A situation in a market in which there is excess demand or supply |
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4 possible changes in demand & supply curvee |
Increase in demand (right) decrease in demand (left) Increase in supply (right) decrease in supply (left) |
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Comparitive Statistics |
The derivation of predictions by analyzing the effect of a change in a single exogenous (independent) variable on the equilibrium. |
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Absolute price |
The amount of money that must be spent to acquire 1 unit of a commodity. "money price" |
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Relative Price |
The ratio of the money price of one commodity to the money price of another commodity; the ratio of 2 absolute prices. |
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Income claims |
All economic value that's produced belongs to someone in the form of an income claim on that value |
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Nominal national income |
Total national income measured in current dollars "current dollar national income" |
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Real national income |
National income measured in constant (base period) dollars. It changes only when quantities change. Real = adjusted for inflation |
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Recession |
A fall in the level of real GDP. Often defined precisely as 2 consecutive quarters of negative growth in real GDP. |
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Business Cycle |
Fluctuations of real national income around its trend value that follows a wavelike pattern. Ebb&Flow. |
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Potential Output (Y*) |
The real GDP that the economy would produce if its productive resources were fully employed and operated normally. |
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Output gap |
Actual output minus potential Output. Y-Y* |
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Recessionary Gap |
A situation in which actual output is less than potential output. |
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Inflationary Gap |
A situation in which actual output exceeds potential output |
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Potential GDP Growth = |
Long term economic growth |
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Points of business cycle over time |
Recessions/contraction Trough Recovery)expansion Peak |
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Employment |
The number of persons 15+ who have jobs |
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Unemployment |
Number of persons 15+ who are not employed and actively searching for work |
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Labour Force |
Number of persons employed + unemployed |
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Unemployment Rate |
Unemployment expressed as a % of labour force. Unemployed/labour force X 100% |
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Frictional Employment |
Normal turnover |
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Structural Employment |
Mismatch between the structure of the suppliers of labour and the structure of the demand for labour |
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Full employment |
When economy is at potential GDP |
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Cyclical Unemployment |
Rises and falls with ebbs and flows of business cycle |
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Seasonal fluctuations |
Unemployment rate adjusted for regular season fluctuations in unemployment |
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Labour productivity |
Level of real GDP divided by the h level of employment (or total hours worked) |
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Price Level |
The average level of all prices in the economy expressed as an index # |
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Inflation |
A rise in the average level of all prices (price level) |