Unit 1
What are the defenitions of...
Opportunity Cost
Efficiency
Economic Growth
Name the Factors of Production
Opportunity Cost: is not just the monetary cost of a good, but also every other factor that must be given up to get that good.
Efficiency: in an economy is there no way to make anyone bettwe off without making at leas one person wose off.
Economic Growth: is an increase in the maximum amout of goods and services an economy can produce.
Factors of Production:
Capital, Land, Labor, and Entrepreneurship
What are the factors that shift supply curve?
What are the factors that shift demand curve?
Factors of demand:
Tastes and preferences, amount of consumers, price of related goods, income, and price expectations (TRIPE)
Factors of supply:
Resource costs, technological advancements, number of sellers, government actions, price expectations, and price of related goods (I-RENT)
What is Short run and Long run?
Short-run: a period in which at least one resource is fixed.
-ie. plant/capacity: size is NOT changeable
-it is NOT a quantity of time
Long-run:ALL resources are variable
-NO fixed resources
-plant/capacity: size is changeable
What is Marginal Resource Cost and Marginal revenue Product?
MRC: the additional cost of an additional worker
MRP: an additional revenue generated by an additional worker
What is Marginal Social Cost and Marginal Social Benefit and what are the 4 market failures?
MSC: additional cost imposed on society as a while by one additional unit
MSB: additional benefit to society as a whole from one additional unit.
4 Market Failures: public goods, externalities, impercet competition, and unequal distribution of income.
Definitions of...
Comparative advantage
Absolute Advantage
Terms of Trade
Comparative Advantage: if trade partner's opportunity cost is the lowest among the producers who could produce more within a given amount of time and resources.
Absolute Advantage: if they can produce more within a given amount of time and resources.
Terms of Trade: the rate at which one good can be exchanged for another
State the law of supply and the law of demand
Law of Supply: other things being equal, the price and quantity supplied of a good are positively related.
Law of Demand: other things being equal, a higher price for a good leads people to demand a smaller quantity of the good (negativley related).
Illustrate Short-run and Long-run graphs with components
Full answer in binder: Econ Notes 3.2-3.3
What are the shifters for Demand and supply in labor?
Supply:
education and training, availability of alternate options, immigration and mobility of workers, cultural expectations, working conditions, prefrences for leisure
Demand:
Price of output, productivity of worker, change in price of other resources (substitute & complementary)
What are the two types and two categories of externalities? What do their graphs look like? (irl ex)
Positive ext: unintended positive consequence incurred by a thir party
Negative ext: unintended negative consequence incurred be a third party.
Production: unintended consequence occurs because of the production of said good/service.
Consumption: unintended consequence occurs because of the consumption of said good/service.
Graphs in Binder: 6.2 Econ
Definition of...
Marginal Utility
Cost Benefit Analysis
Sunk Costs
Marginal Utility: the comparaisons of the costs andbenefits of one more vs. one less
MU = change in TU / change in output
Cost Benefit Analysis: process of comparing the costs and the benefits of an option.
Sunk Costs: expenses that have been paid and cannot be recovered.
Practice with online example
What is the price elasticity of demand and supply, the formula, and real life examples, the graphs: perfectly inelastic, relatively elastic, unit elastic, relatively elastic, perfectly elastic.
PED: the measurement of how much the quantity of a product consumers want changes when its price changes.
PES: the measure of responsiveness of quantity good supplied to changes in the price if that good.
Formula: The ratio of % change in the quantity demanded/supplied to the % change in the price as we move along the demand/suppy curve.
Other responses in binder: Econ Notes 2.3-2.4
What is profit maximizing? (the formula+definition)
What is the principal of marginal returns?
Graph a Marginal revenue curve with its components
Profit Maximizing: a business strategy to find the ideal price and output level that generates the highest possible total profit
Formula: MR = MC
Principal of Marginal returns: every activity should continue until the marginal benefit equats the marginal cost.
Other answers in binder: 3.5 Econ
Sketch graph for a perfectly competitive product market and resource market with all components
Answer in Binder: Econ 5.3
Sketch the table for the types of goods (rival, non-rival, excludable, non-excludable)
Determine what is a common resource and its graph
Common Resource: a nonexcludable and rival in consumption: you can't stop others from consuming the good, when consumed, less is available for you.
Other answers in binder: Econ 6.3
Definition and Rule of an Optimal consumption Bundle
Do a Practice!
Defenition: Consumption Bundle that maximizes the consumers total utility wih their budget constraint.
Rule: in order to maximize utility, a consumer must equate the mu per dollar spent on each good in the consumptio bundle.
What is Cross Price Elasticity (XED)
And how does it affect complements and substitues
What is Income Elasticity (IED)
And how does it help you determine income-elasticity and what type of good it is.
Cross Price Elasticity: measures the effect of a change in one good's price on the quantity demanded of the other good.
Substitutes in XED:
In consumption it will be a positive rightward shift.
-close substitutes = +XED (large shift)
-not close substitutes = +XED (small shift)
Complements in XED:
In consumption it will be a - leftward shift.
-if XED slightly below 0 = weak complement
-if XED is 0 = unrelated goods
Income Elasticity: measures how chanhes in income affect the demand for a good.
Inelastic: IED > 1
Elastic: IED < 1 (IED must be +)
Normal good: IED+
Inferior good: IED-
What is the formula for total revenue, total cost, and profit?
What is the difference between implicit and explicit costs?
What is the difference between accounting and economic profit?
TR = Price x Quantity
TC = FixedC + VariableC
Profit = TR - TC
Explicit Cost: (out of pocket costs) are payments paid by firms for using the resources of others. i.e. rent, wages, materials, electricity bills, etc.
Implicit Cost: opportunity costs that firms "pay" for using their own resources. i.e. forgone wage, forgone rent, time, etc.
Accounting Profit: TR - accounting costs (explicit only)
Economic Profit: TR - economic costs (explicit + implicit)
Sketch Graph with all components for Imperfect Competition
Answer in Binder: Econ 5.4
What is a pigouvian tax/subsidy? How is it seen on a graph
What is Marginal Cost Pricing and Average cost Pricing?
Pigouvian...
Tax: taxes designed to correctfor the inefficiences of external costs.
Subsidy: payment designed to correct for the inefficiences of the external benefits
Marginal Cost Pricing: occurs when regulations set by a monopoly's price equal to its marginal cost to achive efficiency.
Average Cost Pricing: occurs when regulations set by a monopoly's price equal to its average cost to prevent the firm from incurring a loss.
Other Answers in Binder: Econ 6.4
What does the Production Possibilities Curve (PPC) calculate?
Sketch the graph and it's components: an increasing opportunity cost, economic growth, a shrinking economy
The PPC is a model that helps economists think about the trade-offs necessary in every economy: efficiency, opportunity cost, and economic growth
Other Answers in Binder: Econ Reading
Illustrate following graphs with their components and defenitions:
Total Surplus
Exicise Tax
Lump-sum Tax
Full answer in binder: Econ Notes 2.8
Graph Costs & Production in the short-run, show another two graphs demonstrating break even price and shut-down price
Answer in Binder: Econ 3.6
What is the least cost rule?
a firm minimizes production costs for a given output level by combining inputs (like labor and capital) so that the marginal product per dollar spent is equal for all resources
MPx/Px = MPy/Py
What is the Lorenz Curve and the Gini-Coefficient? Give example of them in a graph.
Lorenz Curve: the distribution of a country's wealth throughout 5 social-economic groups
Gini-coefficient: statistical measurement of income
=area A / A + B
Other answers in Binder: Econ 6.5