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Chapter 1 - Preliminaries

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pranitsingh524's version from 2016-09-10 09:32

Section

Question Answer
Branch of economics that deals with the behavior of individual economic units as well as the markets that these units comprise.microeconomics
consumers, firms, workers, and investorsmicroeconomics
Branch of economics that deals with aggregate economic variablesmacroeconomics
level and growth rate of national output, interest rates, unemployment, and inflationmacroeconomics
have limited incomes, which can be spent on a wide variety of goods and services, or saved for the future.consumers
face limits in terms of the kinds of products that they can produce, and the resources available to produce them.firms
face constraints and make trade‐offsworkers
people must decide whether and when to enter the workforce, in their choice of employment, and must sometimes decide how many hours per week they wish to work, thereby trading off labor for leisureworkers
a whole formed by combining several (typically disparate) elementsaggregate
who sets the prices in a centrally planned economy?the government
describes how prices are determinedmicroeconomics
in a market economy prices are determined by whom?consumers, workers, firms
where do the interaction occur in determining prices? who determines the prices?in markets; collection of buyers & sellers determine price of good
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Question Answer
In economics, explanation and prediction are based ontheories
Theories are developed to explain what in terms of a set of basic rules and assumptions?observed phenomena
what is a model?a mathematical representation, based on  economic theory, of a firm, a market, or some other entity.
what is positive analysis?Analysis describing relationships of cause and effect.
what is normative analysis?Analysis examining questions of what ought to be.
what is a market?Collection of buyers and sellers that, through their actual or potential interactions, determine the price of a product or set of products.
what is a perfectly competitive market?Market with many buyers and sellers, so that no single buyer or seller has a significant impact on price.
what is market price?Price prevailing in a competitive market.
what is arbitrage?Practice of buying at a low price at one location and selling at a higher price in another.
what are included in a market?Determination of the buyers, sellers, and range of products
what is the extent of a market?Boundaries of a market, both geographical and in terms of range of products produced and sold within it.
Give 2 reasons of why learning about markets is important1. A company must understand who its actual and potential competitors are for the various products that it sells or might sell in the future; 2. public policy decisions.
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Question Answer
what is nominal price?Absolute price of a good, unadjusted for inflation.
what is real price?Price of a good relative to an aggregate measure of prices; price adjusted for inflation.
what is the consumer price index?Measure of the aggregate price level.
what is the producer price index?Measure of the aggregate price level for intermediate products and wholesale goods.
what is aggregate price level?A measure of the average level of prices of goods and services in the economy.
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Question Answer
Who proposed the idea of Aggregate Demand and Aggregate Supply?John maynard canes
In the long run, how much does the average real GDP grow?3%
what is aggregate demand?a schedule or curve that shows the total quantity of goods and services demanded (purchased) at different price levels: shows the total of real output that the economy demands at each price level; the curve is downsloping because of the real-balances effect
what is aggregate supply?a schedule or curve showing the total quantity of goods and services supplied (produced) at different price levels
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