5 Foundations of Economics
Macroeconomics is the study of....
Overall aspects and workings of an economy
"Ceteris Paribus" assumption
All other things being equal.
Law of Supply vs Law of Demand
*Define each
Law of demand: price and demand have an opposite relation
Consumer Surplus is ...
The difference between the willingness to pay for a good/service and the price paid
what are price controls?
legal restrictions on how high or low a market price may go; usually generates undesirable side effects consisting of various forms of inefficiency and illegal activity.
Why will money be worthless if it grew on trees in unlimited quantity?
It wouldn't be scarce
What is a production possibilities frontier?
The possible quantities that can be produced of two products if both depend upon the same finite resource for their manufacture.
When the price of a good increases the quantity demanded ____.
decreases
The Willingness to pay is ...
**Give an exampleThe maximum price a consumer will pay for a good/service
If a store sells a good at the market price, even though the government authorities have set the minimum price that can be charged, the store is selling the good in a(n)
illegal market for a market price that is lower.
Consumer make tradeoffs on ...
Which goods and services to buy
In the PPF model, an unattainable point lies ...
Only outside the PPF
When supply shifts left and demand shifts right, the equilibrium price:
Always rises.
How do you calculate the Total Surplus (Social Welfare)
= Consumer Surplus + Producer Surplus
The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families. The law that sets food prices low enough to meet these requirements would be an example of a(n)
Price ceiling
What is comparative advantage?
It is the ability to produce a particular good or service at a lower opportunity cost.
Positive Vs Normative Economics analysis
*Define each
Positive- can be tested and validated, it describes "what is"
Normative- an opinion cannot be tested or validated; it describes "what ought to be''
When both supply and demand shift to the right, the equilibrium:
quantity always rises.
What in an Incidence of taxation?
The burden of taxation on the party who pays the tax
Per Capita GDP is...
If we divide a country's GDP by the population in the country, we get per capita GDP.
What is opportunity cost?
Give an example
The alternative good or service that one sacrifices because a different good/service was purchased.
What are Endogenous factors?
Factors that can be controlled for in a model
When will people search harder for substitutes for oil?
when the price of oil is high
Deadweight loss is...
money that consumers, sellers, and the government do not get.
A period during which total production and total employment are decreasing; GDP is decreasing