Intoduction to microeconomicIntoduction to microeconomicIntoduction to microeconomicIntoduction to microeconomicIntoduction to microeconomicIntoduction to microeconomicIntoduction to microeconomicIntoduction to microeconomicIntoduction to microeconomicIntoduction to microeconomicIntoduction to micr...
Ockham's Razor - <<ANSWER>>The principle that irrelevant detail should be cut away.
*Ceteris Paribus or All Else Equal* - <<ANSWER>>- A device used to analyze the relationship between
two variables while the values of other variables are held unchanged.
- Using the device of ceteris paribus is one part of the process of abstraction.
In formulating economic theory, the concept helps us simplify reality to focus on the relationships that
interest us.
Three Fundamental Concepts - <<ANSWER>>Opportunity cost, marginalism, scarce
*Opportunity Cost* - <<ANSWER>>- The best alternative that we forgo, or give up, when we make a
choice or a decision.
*Model* - <<ANSWER>>A formal statement of a theory, usually a mathematical statement of a
presumed relationship between two or more variables.
*Variable* - <<ANSWER>>A measure that can change from time to time or from observation to
observation
*Scarce* - <<ANSWER>>Limited -> Economic goods.
*Marginalism* - <<ANSWER>>- The analysis of the additional or incremental costs or benefits arising
from a choice or decision.
- Take decisions step by step.
,*Efficient Markets* - <<ANSWER>>- A market in which profit opportunities are eliminated almost
instantaneously.
- No free lunch
The Three Basic Questions - <<ANSWER>>- Every society has some system or process that transforms its
scarce resources into useful goods and services. In doing so, it must decide (I) what gets produced (II),
how it is produced and (III) to whom it is distributed.
- The primary resources that must be allocated are land, labor and capital.
*Capital* - <<ANSWER>>Things that are produced and then used in the production of other goods and
services.
*Factors of Production (or Factors)* - <<ANSWER>>The inputs into the process of production. Another
term for resources.
*Inputs or Resources* - <<ANSWER>>- Anything provided by nature or previous generations that can be
used directly or indirectly to satisfy human wants.
- Load, labor, capital -> Combined, used to make product.
*Outputs* - <<ANSWER>>- Goods and services of value to households.
- Product.
*Production* - <<ANSWER>>The process that transforms scarce resources into useful goods and
services.
*Production Possibility Frontier (PPF)* - <<ANSWER>>A graph that shows all the combinations of goods
and services that can be produced if all of society's resources are used efficiently.
, Theory of Comparative Advantage - <<ANSWER>>Ricardo's theory that specialization and free trade will
benefit all trading parties, even those that may be "absolutely" more efficient producers.
*Absolute Advantage* - <<ANSWER>>A producer has an absolute advantage over another in the
production of a good or service if he or she can produce that product using fewer resources (a lower
absolute cost per unit).
*Comparative Advantage* - <<ANSWER>>A producer has a comparative advantage over another in the
production of a good or service if he or she can produce that product at a lower opportunity cost.
*Firm* - <<ANSWER>>- An organization that transforms resources (inputs) into products (outputs). Firms
are the primary producing units in a market economy.
- Firms build factories, hire workers, and buy raw materials because they believe they can sell the
products they make for more than it costs to produce them.
*Entrepreneur* - <<ANSWER>>A person who organizes, manages, and assumes the risks of a firm, taking
a new idea or a new product and turning it into a successful business.
*Households or Consumer* - <<ANSWER>>The consuming units in an economy.
Factors of Household's Decision Making - <<ANSWER>>A household's decision about what quantity of a
particular output, or product, to demand depends on a number of factors, including:
- The price of the product in question.
- The income available to the household.
- The household's amount of accumulated wealth.
- The prices of other products available to the household.
- The household's tastes and preferences.
- The household's expectations about future income, wealth, and prices.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Nurseking. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $17.99. You're not tied to anything after your purchase.
