Vocab
The branch of economics that deals with how over all economies or markets operate on a large scale
What is macro economics?
A country with no trade is said to be said to be in _______.
Autarky
The law of demand:
What is: If all else is equal when P increases, Qd decreases and vice versa
A graph demonstrating the production capabilities of a country between 2 products.
What is: A PPF
What is deadweight loss?
What is: Opportunity cost?
Production possibilities of country A and B:
A: 39 cars 13 Peaches
B: 48 cars 24 Peaches
1. Who has the absolute advantage in cars?
If the two countries were to specialize and trade with each other, who would import cars?
1. Country B has the absolute advantage because 48>39
2. B will import cars
OC of cars Country A: 13/39= 1/3 peaches
OC of cars Country B: 24/28= 1/2 peaches
Law of Supply:
What is: All else held equal, if Price increases, Qs increases
The ability of a individual/group to carry out an activity more efficiently than a another individual/group
WTP- Pe= __________
Pe- WTA= __________
Consumer Surplus= Price willing to pay - Equilibrium price
Producer surplus= Equilibrium Price - Price willing to accept
Scarcity
What is the effect of taxes:
Deadweight loss, decreased consumer/producer surplus, Increased government revenue
Consider a normal market for umbrellas: If the country is likely to experience an intense drought over the next 5 months, what will happen to the Qd and P of umbrellas?
Qd: Decreases
P: Decreases
The Difference between comparative and absolute advantage:
Absolute advantage: Who can produce the absolute most with given resources, considering nothing else
Comparative advantage: Who can produce the product for the lowest OPPORTUNITY COST
Minimum wage, Agriculture products
Give one example of a trade off you might make in your everyday life:
-Trading money for chick-fil-a
-Doing my homework rather than watch football
- Staying warm or taking my dog outside
It takes you 1/2 an hour to do a macro HW assignment, and 2 hours to do an english assignment. 1. What is the opportunity cost of you doing 2 macro assignments?
2. What is opportunity cost of doing 1 english assignment?
1. 1/2 english assignments
(1 english/ 4 macro) * 2 macro=
2. 4 macro assignments
(4 macro/ 1 english) * 1 english assignment =
List 2 demand and 2 supply shifters:
Demand: Income, # of buyers, expectations, price of related goods, Tastes and preferences
Supply: P of inputs, # of seller, expectations, technology
Draw a basic PPF graph for Diamonds and apples
...
Hotdogs are a _______ to hamburgers and a ________ to ketchup.
What is: Substitute; complement
When the government regulates prices rather than letting market forces determine prices in markets
Price Controls
Draw a graph demonstrating the changes of P and Qd if there is both a decrease in income and an increase in price of inputs
....
Any point on the line will be efficient and use all of a countries resources between the two products.
Any point below will be inefficient. Any point above will be impossible based on current resources.
The government sets a price ceiling of 3 dollars on wheat to help local farmers, when the normal equilibrium price is at 4 dollars. What is the effect Qd? Will this force the the market into a shortage or surplus?
Qd decreases, Shortage