Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
PSYC 184 Midterm 1
| Term | Definition |
|---|---|
| Economics | study of rational choice under conditions of scarcity |
| Rational Choice | people make self-interested choices after weighing the costs and benefits of those choices |
| Scarcity | imbalance between what people want and what is freely available |
| Behavioral Economics | study of (irrational) choice under scarcity |
| Traditional Economics vs. Behavioral Economics | Traditional economics says that choices are ALWAYS rational Behavioral economics says that choices are NOT ALWAYS rational both are constrained by scarcity |
| Opportunity Cost | you must give up something in order to get another thing |
| Efficiency | getting the most you can with the resources you have |
| Equation for Opportunity Cost | OC x = loss in y / gain in x |
| Specialization & Trade | if multiple people/economies each have different production curves, we can move to a previously unattainable point through TRADE |
| Comparative Advantage | the opportunity cost is LOWER for one person than for the other person |
| Large Economies have a _____________ shape, meaning that the opportunity cost is ___ ________ constant | concave no longer |
| What is the benefit of doing tasks with comparative advantage? | greater productivity |
| Adam Smith's 'Pin Factory' example shows | why increased specialization can lead to greater productivity |
| Why would increased specialization NOT lead to a greater output? | people may not continue productively working on a task if they don't feel appreciated |
| What were the different conditions for the "All for Naught" experiment? | acknowledged condition: wrote name on top ignored condition: didn't write name shredded condition: didn't write name and shredded immediately |
| What were the results for the "All for Naught" experiment? | acknowledged > ignored > shredded difference between ignored and shredded was not as impactful as difference between acknowledged and ignored |
| Low-hanging fruit principle | the opportunity cost tends to increase with increased output |
| Why would sellers be willing to offer more of an item for sale if its price increases? | This would increase the revenue from every item sold. |
| Which of the following is true about supply and demand? | The quantity demanded decreases with increasing price, whereas the quantity supplied increases with increasing price. |
| Supply | behavior of the sellers the amount of a good that a producer puts on the market for a period of time the goal is to maximize profit |
| Demand | behavior of the buyers the behavior of consumers in the market |
| What determines demand? | • Price of the item itself • Price of substitutes • Price of complementary goods • Tastes and preferences • Income • Expectations |
| What happens to quantity demanded when price increases? | quantity demanded decreases |
| What happens to quantity demanded when price decreases? | quantity demanded increases |
| What happens when price of substitutes increases? | demand increases |
| What happens when price of substitutes decreases? | demand decreases |
| What happens when price of complements increases? | demand decreases |
| What happens when price of complements decreses? | demand increases |
| What happens when taste and preferences change? | demand either increases or decreases |
| What happens when income increases? | demand increases for normal goods demand decreases for inferior goods |
| What happens when price is expected to increase in the future? (demand) | demand increases |
| What happens when price is expected to decrease in the future? (demand) | demand decreases |
| Quantity Demanded vs. Demand | quantity demanded: change in price demand: other factors that cause the entire demand curve to shift |
| What determined supply? | • Price of the item itself • Price of input goods • Technology • Expectations |
| Ceteris Paribus | all else equal |
| What happens when price of Inputs increases? | supply decreases |
| What happens when price of Inputs decreases? | supply increases |
| What happens when technology improves? | supply increases |
| What happens when technology worsens? | supply decreases |
| What happens when price is expected to increase in the future? (supply) | supply decreases |
| What happens when price is expected to decrease in the future? (supply) | supply increases |
| Quantity Supplied vs. Supply | quantity supplied: change in price supply: other factors that cause the entire demand curve to shift |
| When price increases, supply ________ | increases |
| When price increases, demand _________ | decreases |
| Equilibrium | a situation when there is no incentive to change Quantity Supplied = Quantity Demanded |
| Competitive Market | a market in which no individual supplier has significant influence on the market price of the product |
| Excess Demand | Quantity Demanded > Quantity Supplied |
| Excess Supply | Quantity Supplied > Quantity Demanded |
| Calculate Equilibrium: What if the price of complementary goods increases? | demand decreases lower price and lower quantity sold |
| Calculate Equilibrium: What if technology improves? | supply increases lower price and higher quantity sold |
| Calculate Equilibrium: What if the price of substitutes increases? | demand increases higher price and higher quantity sold |
| Calculate Equilibrium: What if input prices increase? | supply decreases higher price and lower quantity sold |
| Calculate Equilibrium: What if prices are expected to increase in the future? | Supply Decreases, Demand Increases higher price and either the same, higher, or lower quantity sold |
| Calculate Equilibrium: What if prices are expected to decrease in the future? | Supply Increases, Demand Decreases lower price and either the same, higher, or lower quantity sold |
| Elasticity | how much does quantity change as a function of price? |
| Completely Inelastic Demand | quantity doesn't change with price |
| Perfectly Elastic Demand | any increase in price causes quantity demanded to fall to zero |
| Completely Inelastic Supply | quantity doesn't change with price |
| Perfectly Elastic Supply | any decrease in price causes quantity supplied to fall to zero |
| The more VERTICAL a line is | the more INELASTIC it is |
| The more HORIZONTAL a line is | the more ELASTIC it is |
| Factors that obstruct market equilibria | traditional economics: price ceiling/price floor behavioral economics: prospect theory, endowment theory |
| Price Ceiling | maximum allowed price ex) rent control |
| Price Floor | minimum allowed price ex) minimum wage |
| Prospect Theory | utility is evaluated with respect to reference point losses weigh more heavily than gains presented as improvement on expected utility theory |
| Renting your first apartment vs. renting your second apartment is an example of | Prospect Theory |
| Utility Theory | we prefer a variety of things over a surplus of one thing |
| Util | measure of consumer satisfaction (pleasure) |
| Total Utility | total number of utils gained from consuming a particular quantity of a good |
| Marginal Utility | the additional number of utils gained from consuming an additional unit of a good |
| Law of Diminishing Marginal Utility | total utility increases at a decreasing rate total utility plateaus over time |
| Eating pizza for every meal everyday is an example of | marginal utility |
| Weber–Fechner Law | the just-noticeable difference in any variable is proportional to the magnitude of that variable |
| Endowment Effect | we value what we own more than what we do not own you should be unlikely to return something after you take ownership of it |
| You give Bob a piece of metal shaped like a seashell. Which of the following would be most likely to reduce the endowment effect? | telling Bob that this item exists only to be traded at the local market |
| If the quantity demanded changes dramatically when the price changes, demand is said to be | elastic |
| In contrast to humans, what does Richard Thaler call the people who are well described by standard economic models? | Econ |
| What type of error/bias is likely to be most problematic for traditional economic models? | systematic errors because they will not cancel each other out when aggregating across people |
| Transaction Utility | the difference between the reference price and the actual price paid |
| Acquisition Utility | the perceived value of a product's features and performance |
| Permanent Income Hypothesis | you would likely spend a stimulus check over a short period of time |
| Life-Cycle Hypothesis | you would try to spread a stimulus check over the rest of your life |
| Ricardo-Barro Effect | you wouldn't spend any of the stimulus check because you know that the government will eventually have to repay this debt |
Created by:
kkonrad
Popular Psychology sets