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Test 1 Chapters 1, 2, 4

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hakatocu's version from 2016-08-26 23:59

Section

The Market Forces of Supply and Demand
Key Concept ::Explanation
Question Answer
"supply" refers to the _____, whereas the "quantity supplied" refers to _____position of the supply curve; the amount sellers wish to sell
A curve shifts when there is a _____ that is not _____. [picture an x/y chart]change in a relevant variable; measured on either axis
ceteris paribus is Latin for what?all other things being equal
competitive marketa market in which thre are many buyers and many sellers so that each has a negligible impact on the market price
complementswhen a fall in price of one good increases the demand for another good; hot fudge and ice cream, PB & J
demand curvea graph of the relationship between the price of a good (y-axis) and the quantity demanded (x-axis)
demand schedulea table that shows the relationship between the price of a good and the quantity demanded
equilibriuma situation in which the market price has reached the level at which quantity supplied equals quantity demanded
equilibrium price (aka what?)the price that balances quantity supplied and quantity demanded (market-clearing price)
equilibrium quantitythe quantity supplied and the quantity demanded at the equilibrium price
memorize

 

Key Concept:Explanation
Question Answer
Give me an example of "Expectations" (one of the variables that shifts the demand curve)You expect gas prices to be lower next week therefore you're less willing to buy it today
inferior good [linked to which variable; provide example]an increase in income leads to a decrease in demand; a bus ride
law of demandthe claim that, other things equal, the quantity demanded of a good falls when the price of the good rises
law of supplythe claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
law of supply and demandthe claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
marketa group of buyers and sellers of a particular good or service
normal goodan increase in income leads to an increase in demand, like ice cream ;)
Reproduce Fig 4, Shifts in the Demand Curve vs Movements along the Demand Curve for cigarettesCompare to p70
shortagea situation in which quantity demanded is > quantity supplied
substituteswhen a fall in price of one good reduces the demand for another good; frozen yogurt and ice cream, hot dogs & hamburgers
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Key Concept :Explanation
Question Answer
supply curvea graph of the relationship between the price of a good (y-axis) and the quantity supplied (x-axis)
supply schedulea table that shows the relationship between the price of a good and the quantity supplied
surplusa situation in which quantity supplied is > quantity demanded
T or F, a Demand Curve has a positive slope.False
T or F, a Supply Curve has a positive slope.True
The demand curve shifts when?"if something happens to alter the quantity demanded at any given price"
Three steps to analyzing changes in equilibrium, shorthandwhich curve, which direction, look
Three steps to analyzing changes in equilibrium, step 1decide whether the event shifts the supply curve, demand curve, or both
Three steps to analyzing changes in equilibrium, step 2decide which direction the curve shifts
Three steps to analyzing changes in equilibrium, step 3use the S/D diagram to see how the shift changes the equilibrium
What variables can shift the demand curve? [demand shifts how much? (acronym)]TEN PI = Tastes, Expectations, Number of buyers, Prices of related goods, Income
What variables can shift the supply curve? [supply shifts when? (acronym)]NitE = Number of buyers, iinput prices, technology, Expectations
memorize

Chapter 2, Thinking Like an Economist

Key ConceptDr Mankiw's personal explanation
circular-flow diagram a visual model of the economy that shows how dollars flow through markets among households and firms
x macroeconomicsthe study of economy-wide phenomena, including inflation, unemployment, and economic growth
x microeconomicsthe study of how households and firms make decisions and how they interact in markets
x normative statementsclaims that attempt to prescribe how the world should be (world should be normal)
x positive statementsclaims that attempt to describe the world as it is (it positively is this way)
production possibilities frontiera graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
what are the two types of decision makers? (in the Circular Flow model)households and firms
what are the two markets? (in the Circular Flow model)goods & services and factors of production
T, B, R, L? (in the Circular Flow model) householdsRight
T, B, R, L? (in the Circular Flow model) firmsLeft
T, B, R, L? (in the Circular Flow model) markets for goods & servicesTop
T, B, R, L? (in the Circular Flow model) markets for factors of productionBottom
Flow of dollars into firms? (in the Circular Flow model)revenue
Flow of dollars into markets for factors of production? (in the Circular Flow model)wages, rent, profit
Flow of dollars into households? (in the Circular Flow model)income
Flow of dollars into markets for goods and services? (in the Circular Flow model)spending
memorize

Chapter 1, The Principles of Economics

Key ConceptDr Mankiw's personal explanation
business cyclefluctuations in economic activity, such as employment and production.
economicsthe study of how society manages its scarce resources.
efficiencythe property of society getting the most it can from its scarce resources.
equitythe property of distributing economic prosperity fairly among the members of society.
externalitythe impact of one person's actions on the well-being of a bystander.
incentivesomething that induces a person to act. (carrot or stick)
marginal changessmall incremental adjustments to a plan of action.
market economyan economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.
market failurea situation in which a market left on its own fails to allocate resources efficiently.
market powerthe ability of a single economic actor to have a substantial influence on market prices.
opportunity costwhatever must be given up to obtain some item.
productivitythe quantity of goods and services produced from each unit of labor input.
property rightsthe ability of an individual to own and exercise control over scarce resources.
rational peoplepeople who systematically and purposefully do the best they can to achieve their objectives.
scarcitythe limited nature of society's resources.
inflationan increase in the overall level of prices in the economy
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Ten Principles

Question Answer
1-4 are about...How People Make Decisions
1People face trade-offs
2The cost of something is what you give up to get it
3Rational people think at the margins
4People respond to incentives (set)
5-7 are about...How People Interact
5Trade can make everyone better off
6 Markets are usually a good way to organize economic activity
7Governments can sometimes improve market outcomes (set)
8-10 are about...How the Economy as a Whole Works
8A country's standard of living depends on its ability to produce goods and services
9Prices rise when the government prints too much money
10Society faces a short-run trade-off between inflation and unemployment
memorize

Ten Principles mnemonics

Question Answer
mnemonic 1pin, trade-offs (head vs sharp)
mnemonic 2swan, cost (leaving)
mnemonic 3boobs, moving thru narrow margin
mnemonic 4sail, toward riches (incentives)
mnemonic 5hook, two people trading
mnemonic 6golf club, organizing Monopoly pieces
mnemonic 7cliff, government landing on Monopoly
mnemonic 8snowman, producing (hands moving in a blur, products piling in front of him)
mnemonic 9flag, money falling off it
mnemonic 10pin pops balloon revealing sad (unemployed) face, then balloon re-inflates
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