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ECON 110
Exam 1
| Term | Definition |
|---|---|
| economics | Study of choices, decision making |
| microeconomics | study of individuals, firms or markets |
| macroeconomics | study of entire economy at an aggregate level |
| scarcity | Unlimited wants and limited resources |
| opportunity cost | highest valued alternative given up to engage in an activity or consume a good |
| division of Labor | adam smith: divide tasks across individuals (delegate)Theorized division of labor would lead to increase in production |
| specialization | focus on different areas, specialize in specific objectives, efficient |
| economies of scale | as number of goods produced increase, average cost of producing falls |
| positive analysis | based on facts and data, testable in principle |
| normative analysis | subjective questions, opinions |
| extensive economic growth | new resources |
| intensive economic growth | better technology |
| comparative advantage | their opportunity cost is relatively lower than their trading partners |
| absolute advantage | when a country can produce more of a good given the same level of resources as another country |
| trading only works when... | each country has a comparative advantage in producing a good |
| free trade | trading between countries with little to no government restriction (NAFTA 1994) |
| protectionism | use trade barriers to protect domestic firms from foreign competition |
| tariffs | taxes on imports |
| quotas | a limit on the qauntity that can be imported |
| quantity demand | total number of units that all consumers purchase at a given price |
| quantity supply | total number of units sold by all firms at a given price |
| law of demand | as price decrease, quantity demand increases (vice versa), inverse relationship |
| law of supply | as price increases, quantity supply increases |
| demand shifters | taste/preferences, # of consumers, income, price (competitors, expectations) |
| supply shifters | # of suppliers, technology advances, production costs, etc |
| surplus | quantity supply > quantity demand |
| shortage | quantity supply < quantity demand |
| invisible hand theory | By trying to purchase things you desire you’re going to benefit society more than if you weren’t self-interested |
| maximization principle | All agents are trying to maximize some desired outcome (maximize profit, happiness, etc) |
| PPF Question | How much should a society produce given limited resources and fixed technology? |
| increasing opportunity cost | as more resources are devoted to a good, there is a smaller payoff |
| PPF shift | effects productions of both goods |
| PPF swivel | effects production of only one good |
| sources of comparative advantage | labor, natural resources, technological advantage, etc |
| dumping | undercutting by exporting goods for lower value than worth |
| market | production and consumption of goods and services determined by transactions |
| Ceteris Peribus | "all else equal" |
| perfect competition | many firms with identical product |
| monopolistic competition | many firms with similar but not identical products |
| price floor | minimum price one can legally pay or charge – minimum wage - leads to market surplus, has to be higher than equilibrium price |
| price ceilings | maximum price one can legally pay or charge – rent controls - leads to market shortage, has to be lower than equilibrium price |
| consumer surplus | amount consumers are willing to pay minus the amount they actually pay |
| producer surplus | amount producer receives minus what they’d being willing to sell at |
| social surplus | adding consumer and producer surplus together |
| Dead Weight Loss (DWL) | loss in social surplus when a market is producing at an “inefficient” quantity (equilibrium not satisfied)… price ceilings |
| price controls | Measures used in supply and demand to see how “well off” people in the market are |
Created by:
kayleejh0829