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EC 201 Exam 1

EC 201 - Exam 1 - Ballard - MSU Fall '12

Why do we make economic decisions? Because we only have a limited amount of time.
Economics is fundamentally concerned with what? Decision Making
What are the central disciplines of economics? The everyday decisions we make.
Why we import some goods from other countries and export different goods to other countries. International Economics
Interactions between workers and their employers in labor markets. Labor Economics
How economic principles can be used in ways to efficiently clean up pollution. Environmental Economics
The study of how a society chooses to use its scarce resources to produce, exchange, and consume goods and services. Economics
Resources = ____1____ while Desires = _____2_____ 1) Scarce/limited 2) Unlimited
What are the 3 fundamental choices every society must answer? 1) What to produce? 2) How to produce? 3) For whom to produce?
_____________ is concerned w/ the aggregates for the economy as a whole, such as overall rate of unemployment and overall rate of inflation. Macroeconomics
How do you calculate the unemployment rate? Unemployment Rate = people who are unemployed / total # of people in labor force
How do you calculate the inflation rate? Inflation Rate = Calculate change in price for thousands of goods/services, then average those indv inflation rates.
The actual workings of the economy. Positive Economics
“If minimum wage is raised, there’ll be an increase in unemployment among teenagers.” << Example of? Statement Fact
Statement proven right or wrong through gathering and analyzing of data. Statement Fact
What ought to be in the economy. Normative Economics
“It would be immoral for the minimum wage to be less than $10.” << Example of? Statement
A _______ involves value judgment and therefore cannot be proven right/wrong. Statement
Results of decisions made every day. Observable Economy
A stylized representation of some aspect of the real economy. Economic Model
Assumption applied to models insinuating that all other things in the experiment are being held constant. "All other things equal." Ceteris Paribus
The cost of one activity is the value of the next-best alternative. Opportunity Cost
What are some of the opportunity costs of a concert? Spending time waiting in line for tix, spending $ on tix, transportation costs, parking costs, spending your time at the concert instead of doing something else.
A graphical representation of combinations of outputs that can be produced, if all available resources are used as well as possible. Production-Possibilities Frontier
A Production-Possibilities Frontier represents combinations of ____1____ that can be produced if resources are ________2________. 1)Outputs 2)Used as well as possible
If a company produces 100 pairs of blue shoes (0,100) and wants to produce 2 pairs purple shoes (2,98) what is the OC? The OC of 2 pairs purple shoes is 2 pairs blue shoes.
Can you be above the PPF line? No, it's impossible.
What do curved PPF lines mean? The goods being produced aren't being produced with similar resources/technologies.
Any point that falls below the PPF line is considered ______. Waste
__________: The OC of producing 1 additional unit of a good will increase, as we produce more and more of the good. Law of Increasing Opportunity Cost
The OC of producing 1 ___1___ unit of a good will ___2___, as we produce more and more of the good. 1) additional 2) increase
3 reasons for increasing PPF: 1) Tech Improvements 2) Capital Investment 3) Improved Workforce
Real, long-lasting, man-made inputs into the production process; factories, equipment, computers. Capital Investments
If someone can produce a given output using fewer resources than another person they have _______. Absolute Advantage
If someone can ___1___ a given ___2___ using fewer __3__ than someone else. 1)Produce 2)Output 3)Resources
An indv has _______ ________ in something if his/her OC of that activity is lower than the OC of that activity for someone else. Comparative Advantage
Organized exchange of a good/service between buyers & sellers. Market
Any institution/mechanism allowing people to interact to buy/sell a good/service. Market
The actions of buyers. Demand
The amount of a good/service buyers are willing/able to buy at a specific price in a given time period. Quantity of Demand
When the price of a good or service increases, the quantity demanded will decrease all else equal. When the price decreases, the quantity demand will increase. Law of Demand
Law of Demand: When the price of a good/service increases the quantity demanded will ____. Decrease
Law of Demand: When the price of a good/service decreases the quantity demanded will _____. Increase
The Law of Demand describes the relationship between: the price and quantity demanded.
Quantity demanded is ______ related to price. Inversely
When the price of apples increases, a smaller quantity is demanded. << Exp of what? Law of Demand
A table showing the quantity of a good/service that would be demanded, @ a number of different prices. Demand Schedule
A demand schedule for a single person. Individual Demand Schedule
Describes the quantities demanded for all buyers in the market. Market Demand Schedule
_____ _____ is a graph of info in a demand schedule. Demand Curve
A demand curve is a graph of a the relationship between ______ and _____ of a good. Price and quantity demanded
A change in ______ of a good will causes movement along the existing demand curve. Price
The willingness to pay of the consumers in the market. Market Demand Cureve
Price decrease >> customers ______ their quantity demanded. Increase
Movements along the existing demand curve are caused by changes in? The price of the good.
Shifts to a new demand curve are caused by changes in? Other influences on buyers.
Refers to movement along the existing demand curve. Change in Quantity Demanded
Refers to a shift to a new demand curve. Change in Demand
Changes in: Incomes/"tastes/preferences" of consumers, prices of other goods, expectations of future prices/incomes, size/composition of the population << cause? Shifts in demand curves
Consumer income increases >> Demand curve..? Shifts right
Goods that consumers have an increased demand for when incomes rise. Normal Goods
Income rises >> demand of normal good ____ shift of demand curve. Right
Income falls >> demand of normal good _____ shift of demand curve. Left
Goods that consumers have a decreased demand for when incomes increase. Inferior Goods
Income increases >> demand of inferior good ____ shift. Left
When an increase in the P of one good leads to increase in demand for a different good, the goods are ______. Substitutes
If goods are substitutes: and increase in price of one good leads to _______ in demand for the substitute. Increase
If an increase in the price of one good leads to a decrease in demand for the other good, the goods are _____. Complements
If the demand of one good decrease when the P of another good increases, what's their relationship? Complements
If the price of a good increases and the demand of another good doesn't change, the goods are _________. Independent of Demand
If demand increases, the ____ curve shifts _____. Demand, right
Increase in the price of a substitute good can cause an _____ in demand. Increase
________ in the price of a complement good can cause an increase in demand. Decrease
Expectations of lower prices/incomes in the future causes _____ in demand. Decrease
A decrease in the price of a substitute good causes _______ in demand. Decrease
Increase in price of a complement good causes _______ in demand. Decrease
Describes the actions of sellers. Supply
Amount of some good/service that sellers are willing/able to sell at a specific price, in a given period of time. Quantity Supplied
When the price of a good/service increases, the quantity supplied will increase. When the P decreases, the quantity supplied will decrease. Law of Supply
Price of good increases >> what happens to the quantity supplied? It increases
Price of good decreases >> what happens to quantity supplied? It decreases
According to Law of Supply, sellers have a ______ _______ relationship between price and quantity supplied. Direct positive
When production of goods increases, costs of _____ ______ will _____. Additional production, increase
Table that lists different prices for a good/service & shows quantity supplied at each price. Supply Schedule
When making a supply schedule, the only variant is the ______ __ ___ ____. Price of the good
Graph of info in a supply schedule. Supply Curve
A supply curve shows the relationship between the ______ of a good and the quantity supplied. Price
Change in ________: refers to movement along existing supply curve. Quantity Supplied
Change in ________: refers to a shift to a new supply curve. Supply
If input price of a good increases, the supply curve for the good will shift _____. Left
If the price of diamonds increases, the supply curve for diamond rings will shift ____. Left
Improved tech >> supply curve shifts _____. Right.
An increase in taxes on a good acts as an increase in the price of what? Input
If another fast-food restaurant joins the market, what will happen to the supply curve? Supply curve will shift right.
When quantity demanded = less than quantity supplied. Surplus
When quantity demanded = greater than the quantity supplied. Shortage
When quantity demanded ='s quantity supplied. Equilibrium
What lead to equilibrium? Powerful Market Forces
Term used to describe beauty of equilibrium. Even though no one sets out to achieve E, an _______ ______ leads markets in that direction. Invisible Hand
Prices are determined by the interaction between: Supply and Demand
When demand increases: which way does it shift. Right
When demand increases: E price will _____. Increase
When demand increases: E Q will _____. Increase
When demand decreases: which way does it shift. Left
When demand decreases: E price will _____. Decrease
Change in D = E P & E Q move in _____ direction(s). Same
Change in S = E P & E Q move in ______ direction(s). Opposite
When supply curve shifts left, EP will _____ and EQ will ______. Increase, Decrease
When supply curve shifts right, EP will _____ and EQ will _______. Decrease, Increase
People became ______ before housing market crashed. As Ps escalated, people bought houses to make quick profits. Speculators
NINJA Mortgages No income, no job, or assets
Halt of P increase in housing market >> speculators dropped out of market >> demand curve _________. Began to shift left
Make it illegal to buy and sell at some prices. Price-Control Laws
Can prevent market from finding E. Price-Control Laws
Minimum price that must be paid. (Can't buy/sell for less) Price Floor
Price floors cause: surpluses
Set maximum legal price. (Can't buy/sell for more) Price Ceiling
Rent Control Laws are examples of Price Ceiling
When quantity supplied is different than quantity demanded. Disequilibrium
Created to deal w/ surpluses caused by price floors. Import Quota
Restriction on the quantity that can be imported from another country. Import Quota
If PF is below EP or isn't enforced by gov't, _____. PF has no effect
If PF is above EP and enforced, creates Surpluses
Rent Control Laws result in ____ in total amount of housing consumed. Decrease
A deliberate attempt to outlaw some prices. Price Control
When people in a country sell goods/services to people in another country. Export
When people in a country buy goods/service from people in another country. Import
Occurs when imports are greater than exports. Trade Deficit
Occurs when exports are greater than imports. Trade Surplus
Taxes on imports. Tariffs
Tariffs _____ prices paid by buyers in importing country and ______ quantities. Raise, reduce
Who are import quotas administered by? The importing country
The beneficiary is the holder of the import license. Quota Rent
Restrictions on quantity of good that can be sold country to country. Administered by exporting country. Voluntary Export Restraints
VERs are administered by ______. The exporting country.
How to calculate tariff revenue: Tariff Revenue = Amount of tariff per unit x # of units bought and sold. Tariff per unit = (PBuyers-PSellers)
Says it's beneficial to give trade protection to a domestic industry during the first few years of its existence. Infant_Industry Argument
Percentage change in one variable, divided by percentage change in another variable. Elasticity
When looking at the change in quantity demanded for a good, caused by a change in its own price. Own-Price Elasticity of Demand
Elasticity calculated: • Elasticity = [Percentage change in quantity of jogging shorts demanded] / [percentage change in price of jogging shorts]
Reference Level of Quantity Demanded: Use midpoint (average) between beginning quantity demanded and ending quantity demanded.
Reference Level of Price Demanded: Use midpoint (average) between beginning price demanded and ending price demanded.
Created by: 1288463369



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