people and economic principles
Who wrote Wealth of Nations?
Adam Smith
Equilibrium price must increase when (demand does what and supply does what)
demand does not change and supply decreases.
The price elasticity of supply measures how much the _____ _______ responds to changes in the _____ of a the good.
quantity supplied, price
What condition must be met for a market to achieve allocative efficiency?
MB=MC
Trade allows ______ which _____ costs
specialization, reduces
Jerome Powell is the
Difference between competitive market and perfectly competitive market
competitive: many buyers and sellers
perfectly competitive: goods are all the same, and their are price takers.
What does a price elasticity of demand (PED) equal to 0 mean, and give a real-world example.
Perfectly inelastic demand — quantity demanded does not change with price. Example: life-saving insulin.
Who bears more of the tax burden when demand is more inelastic than supply?
Consumers bear more of the tax burden.
What is the purpose of a quota in international trade?
A quota is a limit on the quantity of a good that can be imported or exported during a given time period, often used to protect domestic industries.
2 T
What results from a binding price ceiling (set below equilibrium)?
a shortage
What does it mean if supply is perfectly elastic? Shape included.
The supply curve is horizontal — producers will supply any quantity at one price.
If the government imposes a per-unit tax on a good, which curve(s) shift? producer vs consumer.
The supply curve shifts left (if the tax is on producers) or the demand curve shifts left (if the tax is on consumers).
What is the difference between absolute advantage and comparative advantage?
Absolute advantage refers to a country’s ability to produce more of a good with the same resources, while comparative advantage refers to producing a good at a lower opportunity cost than another country.
A _________ allocates resources through the decentralized decisions of many households and firms as they interact in markets.
free market economy
If marginal cost exceeds marginal benefit in production, what does this imply about resource allocation?
There is overproduction; resources are being misallocated.
What happens to consumer and producer surplus when a government imposes a tax on a good with inelastic demand?
Total surplus decreases due to deadweight loss.
If a tax is imposed on a good, how does the elasticity of demand and supply influence the overall tax incidence?
The more inelastic the demand or supply, the larger share of the tax burden that side will bear. If demand is more inelastic than supply, consumers bear more of the tax; if supply is more inelastic, producers bear more.
PD<PW means domestic country...
has comparative advantage, export good
Ultimate source of inflation
Money growth
In a two-good market, if the price of Good A increases and the demand for Good B also increases, what is the relationship between the two goods?
They are substitutes.
If a good’s price rises and total revenue stays the same, what is the elasticity?
Unit Elastic, 1
Matt is taking his laundry to Marcelos dry cleaning business. For this each month, Matt is willing to pay 165 and Marcelos cost is 140. They agree on a price of 150 per month.
Calculate CS PS and TS
CS: 15
PS: 10
TS:25
-National Security Argument
-Job Argument
-Infant-Industry Argument
-Unfair-Competition Argument
-Protection-as-a-Bargaining-Chip Argument