Exam 1 terms and concepts
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| show | Simplified version of reality, can be used to make predictions, which can be used to test model accuracy
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| Ceteris Paribus | show 🗑
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| show | Describes how it works, involves making forecasts, often asses policy based on efficiency
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| Normative | show 🗑
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| show | Used to show how efficient different scenarios of data are, increasing opportunity leads to bowed out
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| Scarcity | show 🗑
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| show | How much less of one good can be produced if more than the other good is produced, the amount of given up
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| show | Production if it produces on the production possibility frontier, allocation if it produces the mix of goods and services the people want to consumer
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| show | An increase in factors of production, resources such as land labor capital, human capital, inputs that are not used up in production, improved technology
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| Two country model | show 🗑
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| show | Represents transactions within the economy as flows of goods, services, and money between households and firms, transactions occur in markets,
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| Circular Flow Model | show 🗑
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| show | Competitive Market, operates through pressing toward and equilibrium
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| Competitive Market | show 🗑
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| Equilibrium | show 🗑
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| show | Slopes downward, movement along can only occur when a price changes leads to the change in the quantity demanded
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| show | Fundamental relationship between price and quantity, estimated by the demand schedule
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| Demand Schedule | show 🗑
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| show | Ceteris Paribus, inverse relationship between price and quantity demanded
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| show | Market demand, change in number of consumers, income(normal directly related, inferior inversely related), expectation about future prices, tastes and preferences(substitutes and complement)
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| show | More individuals more market demand, the horizonal sum of the individual demand curve of all consumers in the market
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| show | Estimated by supply schedule, graphically represented, slopes upward, movement along can only occur when a price change leads to a change in quantity supplied
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| Supply | show 🗑
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| Law of Supply | show 🗑
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| show | The sum of individual supply curves for all producers
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| show | Changes: Number of suppliers, input prices(land, labor, capital), technology, expectations about future prices, related goods and service prices, increase in supply causes a rightward shift, decrease in supply causes left shift
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| Land, labor, capital | show 🗑
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| show | The market moves to equilibrium price/point
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| Causes of Price Movements | show 🗑
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| show | When prices are above market clearing level, excess quantity supplied, pushes e-point down. To clear: drop quantity, dropping price, increasing demand
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| show | When prices are below market clearing, pushes e-point up. To clear: increase production, increasing supply, increasing price, lowering demand
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| Changes in Supply and Demand | show 🗑
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| show | Demand shifts: move along supply line, directly related between price and quantity. Supply shifts: move along demand line, inversely related between price and quantity
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| Double Shifts | show 🗑
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| Price control and quotas | show 🗑
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| show | The difference between willingness to pay and price. Equal to the area below the market demand curve but above the price
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| Producer surplus | show 🗑
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| show | The minimum price for a firm to supply goods and service
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| show | The total gain to society from the producers and consumers of a good, sum of consumer and producer surplus. Maximizes gain to the people
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| show | Price Ceilings, Price Floors
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| show | Max market price, below e-price, benefit successful buyers, causes a shortage. Inefficiencies: deadweight loss, black market, allocation among consumers, wasted resources, inefficiently low quality
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| show | Minimum markets price, above e-price, causes surplus. Benefit successful sellers, creates persistent surplus. Inefficiencies: deadweight loss, allocation of sales among sellers, wasted resources, Inefficiently high quality, illegal activity
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| Quantity Controls | show 🗑
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| Quotas | show 🗑
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| Quota Rent | show 🗑
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| OC(A)= B/A | show 🗑
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| show | Quantity Demand Equation
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| QS(P) = n +1/2P | show 🗑
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| show | Consumer Surplus Equation
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| show | Producer Surplus Equation
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