Microeconomics Midterm #1 UD, Professor Stewart

A historically specific way of producing and distributing the means of satisfying humans' needs and wants (relative to E.K. Hunt)

A social totality or organic unity of the forces of production and the social relations of production

In order for humans to survive, it is necessary for them to continually alter materials of nature into forms suitable to satisfy human needs and wants

practiced and relative to all periods of time

tools, buildings, knowledge, skills, techniques, implements, and machines used in the production process.

The Forces of Production

When a society divides its total labor and allocates individuals different quantities and proportions of productive activities

When people are forced into permanent relations and to cooperate with each other through social division of labor

Market-oriented commodity production

the physical characteristics that allows a commodity to satisfy existing human needs and wants

commodities that can be exchanged for money or its quantitative worth, most important to capitalist producers

1) If you don't have the money to purchase a commodity, you won't receive it
2) If a commodity isn't produced and sold for a price that covers cost and yields a normal profit, that commodity won't be produced for long

To obtain money in the market

Individuals are required to make temporary relationships to exchange commodities

C-M-C (commodity to money to commodity) and it satisfies individual needs through indirect and temporary social relations

Private ownership of the means of production (controlled by the capitalist class)

1) Capitalists have the right to appropriate any social surplus produced
2) Capitalists have the right to conceive, organize, and control the labor process

the part of society's material production that is left over after the necessary material costs of production have been deducted

the money form of part of the social surplus

Direct producers (labors) of the product must consume some of the total social product

The large working class does not privately own or control the means of production

the ability to work, which is a commodity sold for money in order to live

one relatively small section of society that privately owns and controls the means of production (capitalists) and one larger class in society that only owns their labor power (working class)

Ask the question "Do I have to sell labor power in order to live?" and a "yes" response means that you are a member of the working class

"individualistic, acquisitive, and maximizing behavior" exhibited by most people in the economic system

The value of commodities that a worker produces must be larger than the values that they consume

Any subjunctive need for happiness could be avoided if one could afford the right commodities

The more that one has, the more that they will want

The amount of Capital one has

-Workers fight with other workers over jobs.
-Workers fight with capitalists about wages and working conditions.
-Capitalists fight with capitalists over larger shares of surplus in the competitive market, so they had to gain capital faster than their rivalries.

Nothing; certain patterns and tendencies are reproduced in capitalism with law-like regularity but there is no order

Capitalists use information regarding movements, prices, and profit rates

"If it takes 2 hours to kill a beaver and 1 hour to kill a deer, then it must be that 1 beaver=2 deer."

He felt that in the early and rude stages in society, the different quantities of labor necessary to obtaining the commodity is the only basis of explaining their exchange value

He argued that it applies to a society where land is given and capital is accumulated and a commodity's value is determined by the relative amounts of required labor used to produce it.

A commodity's value is determined by the amount socially abstract labor time used in production

useful labor and conductive activity of a definite kind exercised with a definite aim, responsible to a commodity's use value (hammering labor, nail into wood)

undifferentiated from any particular form of labor in production and equivalent with all other labors without regard for concrete labor (homogeneous human labor)

the necessary time each day where workers have to work to produce the equivalent of their own "livelihood" (their worth), responsible for a commodity's exchange value

Smith, Ricardo, and Marx all support an objective theory of value (existing independently from individual thought perceptible by observers and capable of being verified) whereas Neoclassical economists have a subjective theory of value determined by the supply and demand curve price theory.

It is important because it determines a commodity's price and value, the other questions asked about capitalism, the concepts used to analyze capitalism, and the conclusions reached about capitalism

Neoclassical economics-supply and demand
Neoridcardian/Sraffian- its conditions and costs of production
Marxian economists- the socially necessary abstract amount of labor that goes into its production

an untested assertion of an alleged fact

an explanation of the mechanism you don't see behind the observed phenomenon

a representation of an economic theory or part of an economic theory

the relationship between independent variable x with the dependent variable y, holding all other determinates of the value of y constant

A change in the y-intercept

The quantity of goods produced in a given time period in a firm, company, or industry.

the resources that go into producing outputs (machinery, natural resources, labor, etc.);
also known as factors of production (land, labor, capital).

Output (Q)/unit input

Output (Q)/unit of labor (L)

Current money
Goods and services

I/P: real income tells you the purchasing power of nominal income
W/P: real wage tells you the purchasing power of nominal wage

the volume of goods and services that a given sum of money can buy

Real wage tells you the purchasing power of your nominal wage

Real income tells you the purchasing power of your nominal income

the assumption of resource scarcity and assume unlimited wants or unlimited demand

Choice

the value of the next best alternative that the decision forces the decision-maker to forgo.

full employment of scarce resources

Insufficient in quantity or number compared to demand

a point, line, or boundary beyond where something or someone is not able to go

The different combination of various goods that a firm can produce given the existing technology and capability of the firm.

There is a negative relationship (slope) between the two goods because when more of one good is produced, less of the other is produced due to scarce resources

The PPF is bowed out because of the assumption that the input, land, has different productivity for producing different outputs

As an increase in the amount of any one input (holding the amount of all others constant), ultimately leads to smaller additional output to the expanding input.

As the production of one good increases, the opportunity costs of producing another good increases

Both Diminishing Marginal Returns and Principle of Increasing Costs depends on the assumption that the input has different productivity for producing different outputs

the assumption that an input has constant productivity for producing different outputs

the number of units of good y that the market makes you pay to purchase good x (Px/Py)

demanded is the number of units of a good that consumers are willing and able to buy at a specific price

1. Price
2. Population size
3. Consumer income (I)
4. Consumer tastes and preference
5. Price and availability of related goods (substitutes and compliments)

relationship of price and quantity demanded of a commodity, holding all other determinants of quantity demanded constant

there is a negative slope on the PPF because people will demand less of an item as the independent variable price increases.

When price increases and nominal income
remains the same, real income decreases
and the number of goods and services that
your nominal income can buy decreases
and people buy less of all goods (the income effect).

Holding all other determinates constant, as
the price of one good increases, people will
leave the market for the relatively less
expensive substitute (the substitution effect).

relationship of price and quantity supplied of a commodity, holding all other determinants of quantity supplied constant

1. Price
2. Size of industry/number of firms
3. Input prices/costs
4. Technological progress

there is a positive slope because producers will supply more of an item as the independent variable price increases.

When the increase in the cost of the new product would cover the OPPORTUNITY cost of the other product.

Supply and Demand curve price theory

equilibrium prices and quantities are determined by supply and demand curves

The Market Equilibrium Graph is a model of the Supply and Demand Curve Price theory

The equilibrium price and equilibrium quantity

There is more quantity demanded then there is quantity supplied at a specific price
(price below equilibrium)

There is more quantity supplied then there is quantity demanded at a specific price
(price above equilibrium)

a legal maximum on the price of a good, purpose is to keep price from rising

a legal minimum on the price of a good, purpose is to keep price from falling

PPF will be negatively sloped and bowed outward, and the market supply curve will be a positively-sloped straight line.

The principle of increasing costs and diminishing marginal returns.

PPF will be negatively sloped and a straight line, and the market supply curve will be a horizontal line.

The principle of constant costs and constant marginal returns.

physical or psychic satisfaction

1. Infinity of infinitesimal buyers/sellers
2. Price taking behavior
3. Homogeneous product
4. Perfect mobility of capital, into/out of any industry
5. Perfect knowledge of the past, present, future

sum of the marginal utility or total satisfaction between two things

measures the additional satisfaction derived from an additional unit of commodity, holding the levels of consumption of all other commodities constant