Econ 1 Midterm 1 - Assignment Essays

question

Economics

answer

study of allocation of scarce resources

question

Counterfactuals

answer

what if things had gone differently?

question

Positive ecnomics

answer

what is? empirical

question

Normative

answer

what ought to be, moral, should we do this?

question

Lorenze curve

answer

more curvature = more inequality

question

Gini coefficient

answer

avg difference in income between all pairs of individuals, A/(A+B)

question

Production possibilities

answer

what could we produce with what we have

question

Absolute advantage

answer

who can make the most of an output

question

comparative advanatge

answer

to produce 1 unit of output who gives up the least

question

Opportunity cost

answer

what you give up to do something

question

Production Possibilities frontier

answer

the line on a production possibilities graph that shows the maximum possible output - economic growth pushes ppf out

question

Productive efficiency

answer

cant make more without decreasing production of something else - on boundary of ppf

question

Allocative efficiency

answer

at point of ppf we prefer

question

Standard model of choice

answer

decision maker picks what they most prefer

question

Economic cost

answer

cost of action out of pocket plus opportunity cost

question

ecnomic rent

answer

what you get over and above next best alternative

question

Substitutes

answer

interchangeable goods (iphone and samsung)

question

Complements

answer

goods that go well together (pie and ice cream)

question

Comparative statics

answer

all else equal what is the effect of changing this one thing

question

Normal good

answer

if richer buy more

question

inferrior good

answer

if richer buy less

question

ordinary good

answer

if cheaper buy more

question

giffen good

answer

if cheaper buy less

question

Nash Equilibrium

answer

set of strategies that are the best options available to all players

question

Backward induction

answer

reason from end to start

question

Production Function

answer

relates inputs to max outputs - Ex) output = f(capital, labor) - tech innovation can drive up

question

Marginal product of input

answer

rate at which input turned to output

question

Average product formula

answer

Output / input

question

return to an input

answer

only increasing 1 input what happens

question

return to scale

answer

increase all inputs what happens

question

Profits formula

answer

pi = revenue - cost

question

Fixed cost

answer

a cost that does not change, no matter how much of a good is produced

question

Variable cost

answer

a cost that rises or falls depending on how much is produced

question

Marginal cost

answer

the cost of producing one more unit of a good

question

Average cost formula

answer

total cost / total production

question

Average variable cost formula

answer

total variable cost / total production

question

Long run

answer

time when all inputs can be varied

question

Short run

answer

atleast 1 input used in fixed amount

question

Decreasing, Constant, INcreasing returns to scale

answer

compare increase in output to increase in inputs

question

Profit Maximization

answer

MR = MC , if MR> MC product more

question

marginal revenue

answer

increase in revenue by producing 1 more output

question

Perfect competition

answer

many small producers with identical products - producers cant change price only react - perfect information - free entry and exit in long run - P=MC

question

Isoquant

answer

a curve that shows all the combinations of two inputs, such as capital and labor, that will produce the same level of output

question

Demand Curve

answer

willingness of buyers to purchase at a given price

question

Supply Curve

answer

willingness of suppliers to produce at a aprice

question

Equilibrium price

answer

intersection of supply and demand curves

question

Consumer Surplus

answer

willing to pay minus price paid and summed for all people

question

Producer surplus

answer

price sold - price willing to sell at and summed for all producers

question

Demand Shifters/Shocks

answer

-Disposable income
-Price of substitutes
-Price of complimentary goods
-Trends

question

Supply Shifters/Shocks

answer

-input price
-tech innovation
-# of producers
-production disruption

question

Price Cieling

answer

Set max price

question

Price Floor

answer

Set minimum price

question

Utilitarian

answer

want highest well being for collective group - add everyone up

question

Minimax

answer

society is only as well off as its worst off citizen

question

Price Elasticity

answer

-Sensitivity of supply or demand to price
- (Percent change in Qd or Qs) / (percent change in P)
- abs value

question

Percent change in Q formula

answer

% = (Change in Q) / (midpoint of Q before and after change) X 100

question

Percent Change P Formula

answer

% = (Change in P) / (midpoint of P before and after change) X 100

question

Inelastic Demand

answer

- E < 1
- steeper
- small quantity response to price change
-expenditure increase when price increase

question

Elastic Demand

answer

- E > 1
- Flatter
- Big quantity response to price change
- expenditure decrease when price increase

question

Tax formula for supply/demand curve

answer

Pd-Ps = T

question

Who is hurt most by tax?

answer

supply or demand curve that is most inelastic

question

For a given per unit tax, a more elastic good will have...

answer

-more deadweight loss
- less price increase

question

For a given per unit tax, a more inelastic good will have...

answer

-less deadweight loss
- more price increase

question

Regressive tax

answer

proportion of income for tax is higher for poor than rich

question

Progressive Tax

answer

proportion of income for tax is higher for rich than poor

question

Lump Sum tax

answer

-everyone pays same amount
-very regressive

question

Partial vs general equilibrium

answer

- Partial looks for price that balances supply and demand in one market, general is all markets at once
- General deals with knock on effects

question

Why is economy PPF curved

answer

Increasing opportunity cost

question

How does a choice of outputs relate to the standard model?

answer

That is the persons preferred bundle of goods

question

According to the assumptions of the perfectly competitive model, what would we expectto happen in this industry in the long run and why?

answer

More firms will enter the market which will drive the price down until nobody is making any profits

question

Why does P = MR in perfect competition model

answer

Buyers take price as given and their actions don't affect the price

1 of 71

question

Economics

answer

study of allocation of scarce resources

question

Counterfactuals

answer

what if things had gone differently?

question

Positive ecnomics

answer

what is? empirical

question

Normative

answer

what ought to be, moral, should we do this?

question

Lorenze curve

answer

more curvature = more inequality

question

Gini coefficient

answer

avg difference in income between all pairs of individuals, A/(A+B)

question

Production possibilities

answer

what could we produce with what we have

question

Absolute advantage

answer

who can make the most of an output

question

comparative advanatge

answer

to produce 1 unit of output who gives up the least

question

Opportunity cost

answer

what you give up to do something

question

Production Possibilities frontier

answer

the line on a production possibilities graph that shows the maximum possible output - economic growth pushes ppf out

question

Productive efficiency

answer

cant make more without decreasing production of something else - on boundary of ppf

question

Allocative efficiency

answer

at point of ppf we prefer

question

Standard model of choice

answer

decision maker picks what they most prefer

question

Economic cost

answer

cost of action out of pocket plus opportunity cost

question

ecnomic rent

answer

what you get over and above next best alternative

question

Substitutes

answer

interchangeable goods (iphone and samsung)

question

Complements

answer

goods that go well together (pie and ice cream)

question

Comparative statics

answer

all else equal what is the effect of changing this one thing

question

Normal good

answer

if richer buy more

question

inferrior good

answer

if richer buy less

question

ordinary good

answer

if cheaper buy more

question

giffen good

answer

if cheaper buy less

question

Nash Equilibrium

answer

set of strategies that are the best options available to all players

question

Backward induction

answer

reason from end to start

question

Production Function

answer

relates inputs to max outputs - Ex) output = f(capital, labor) - tech innovation can drive up

question

Marginal product of input

answer

rate at which input turned to output

question

Average product formula

answer

Output / input

question

return to an input

answer

only increasing 1 input what happens

question

return to scale

answer

increase all inputs what happens

question

Profits formula

answer

pi = revenue - cost

question

Fixed cost

answer

a cost that does not change, no matter how much of a good is produced

question

Variable cost

answer

a cost that rises or falls depending on how much is produced

question

Marginal cost

answer

the cost of producing one more unit of a good

question

Average cost formula

answer

total cost / total production

question

Average variable cost formula

answer

total variable cost / total production

question

Long run

answer

time when all inputs can be varied

question

Short run

answer

atleast 1 input used in fixed amount

question

Decreasing, Constant, INcreasing returns to scale

answer

compare increase in output to increase in inputs

question

Profit Maximization

answer

MR = MC , if MR> MC product more

question

marginal revenue

answer

increase in revenue by producing 1 more output

question

Perfect competition

answer

many small producers with identical products - producers cant change price only react - perfect information - free entry and exit in long run - P=MC

question

Isoquant

answer

a curve that shows all the combinations of two inputs, such as capital and labor, that will produce the same level of output

question

Demand Curve

answer

willingness of buyers to purchase at a given price

question

Supply Curve

answer

willingness of suppliers to produce at a aprice

question

Equilibrium price

answer

intersection of supply and demand curves

question

Consumer Surplus

answer

willing to pay minus price paid and summed for all people

question

Producer surplus

answer

price sold - price willing to sell at and summed for all producers

question

Demand Shifters/Shocks

answer

-Disposable income
-Price of substitutes
-Price of complimentary goods
-Trends

question

Supply Shifters/Shocks

answer

-input price
-tech innovation
-# of producers
-production disruption

question

Price Cieling

answer

Set max price

question

Price Floor

answer

Set minimum price

question

Utilitarian

answer

want highest well being for collective group - add everyone up

question

Minimax

answer

society is only as well off as its worst off citizen

question

Price Elasticity

answer

-Sensitivity of supply or demand to price
- (Percent change in Qd or Qs) / (percent change in P)
- abs value

question

Percent change in Q formula

answer

% = (Change in Q) / (midpoint of Q before and after change) X 100

question

Percent Change P Formula

answer

% = (Change in P) / (midpoint of P before and after change) X 100

question

Inelastic Demand

answer

- E < 1
- steeper
- small quantity response to price change
-expenditure increase when price increase

question

Elastic Demand

answer

- E > 1
- Flatter
- Big quantity response to price change
- expenditure decrease when price increase

question

Tax formula for supply/demand curve

answer

Pd-Ps = T

question

Who is hurt most by tax?

answer

supply or demand curve that is most inelastic

question

For a given per unit tax, a more elastic good will have...

answer

-more deadweight loss
- less price increase

question

For a given per unit tax, a more inelastic good will have...

answer

-less deadweight loss
- more price increase

question

Regressive tax

answer

proportion of income for tax is higher for poor than rich

question

Progressive Tax

answer

proportion of income for tax is higher for rich than poor

question

Lump Sum tax

answer

-everyone pays same amount
-very regressive

question

Partial vs general equilibrium

answer

- Partial looks for price that balances supply and demand in one market, general is all markets at once
- General deals with knock on effects

question

Why is economy PPF curved

answer

Increasing opportunity cost

question

How does a choice of outputs relate to the standard model?

answer

That is the persons preferred bundle of goods

question

According to the assumptions of the perfectly competitive model, what would we expectto happen in this industry in the long run and why?

answer

More firms will enter the market which will drive the price down until nobody is making any profits

question

Why does P = MR in perfect competition model

answer

Buyers take price as given and their actions don't affect the price

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