Exam (elaborations)
ECO2013 hammock FSU final (1)
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ECO2013 hammock FSU final (1)
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ECO2013 hammock FSU finalScarcity - ANS-lack of something
choice - ANS-Scarcity implies ________
Opportunity cost - ANS-the value of the best thing we give up to get something
Rational self interest - ANS-assume people are rationally self interested; false but useful
Positive economics - ANS-describes the way the world actually is
Normative economics - ANS-describes the way the world should be
Production possibilities frontier - ANS-graph that shows the combination of output that the
economy can possibly reduce given the available factors of production and the available
production technology; demonstrate that tradeoffs exist and resources can be used efficiently or
wastefully
Simple trade - ANS-voluntary exchange creates value
The law of demand - ANS-- As price increases, the quantity demand decreases
- As price decreases, the quantity demand increases
Marginal value (your willingness to pay for an additional good) - ANS-What does the height of
the demand curve represent?
Diminishing marginal utility - ANS-decreasing satisfaction / usefulness as additional units of a
product are acquired
Consumer surplus - ANS-the difference between the highest price a consumer is willing to pay
for a good/service and the actual price the consumer pays (related to demand curve)
Changes in:
- the time of year
- quality of product
- income
- prices of subsidies
- complements, expectations, or tastes/preferences - ANS-What shifts the demand curve?
to the right - ANS-How does the demand curve shift when theres an increase in demand
, to the left - ANS-How does the demand curve shift when theres a decrease in demand?
Law of supply - ANS-- As price increases, the quantity supplied increases
- As price decreases, the quantity supplied decreases
the marginal cost of producing an additional unit of output - ANS-What does the height of the
supply curve represent
Producer surplus - ANS-difference between how much a producer is paid to produce one unit of
output (the price) and the marginal cost of producing that unit of output
- input costs
- changes in technology
- expectations
- taxes/regulations
- firms enter/exit the market
- natural disasters - ANS-What shifts the supply curve?
Total surplus - ANS-consumer surplus + producer surplus
Equilibrium - ANS-where supply and demand meet
Efficiency - ANS-there is no reallocation of goods/resources that has benefits greater than costs;
theres no way to make total surplus bigger
- total surplus is maximized
- marginal benefits = marginal costs
- every unit produced has a benefit to consumers that is greater than or equal to the cost of
production - ANS-If equilibrium is efficient:
either price OR quantity will be indeterminate (but not both) - ANS-If supply and demand both
shift, then:
supply/demand is inelastic (steep curve) - ANS-If the quantity demanded does not change much
when the price changes, then:
supply/demand is elastic (more flat curve) - ANS-If quantity demanded does not change a lot
when price changes, then:
Price controls - ANS-legal restrictions on what prices can be charged; generally inefficient
Price ceiling - ANS-legal maximum price
Non binding price ceiling - ANS-Price ceiling above equilibrium
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