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Economic Principles
Economic Models
Gains from Trade
Supply and Demand
Supply and Demand Part 2
100
This concept refers to the limited nature of society's resources and is the primary reason we study economics.
What is scarcity
100
In the Circular Flow Digram firms play this role (buyer or seller) in the Market for Factors of Production.
What is buyer
100
If a producer can produce a a good or service using fewer inputs then they are said to have this type of advantage in trade.
What is absolute advantage
100
This is the law of demand.
What is when the price of a good falls (rises) the quantity demanded of the good rises (falls).
100
This is a situation in which quantity supplied is greater than quantity demanded.
What is a surplus.
200
This is the property of society getting the most it can from its scarce resources.
What is efficiency
200
In the Circular Flow diagram labor, land, and capital flow through this market.
What is the Market for Factors of Production
200
In the US the opportunity cost of producing one airplane is 10 cars. The point (200 airplanes, 5,000 cars) is on the PPF. This point is also on the US PPF. (300, ?)
What is (300 airplanes, 4,000 cars)
200
This is the price at which quantity supplied is equal to quantity demanded.
What is equilibrium price
200
This will be the result in the market for bacon when the price of a dozen eggs falls. Describe the change (shift or movement along the curve) and the new equilibrium (increase or decrease in price and quantity).
What is demand will shift to the right. Equilibrium price increases, equilibrium quantity increases.
300
This is the property of distributing economic prosperity uniformly among members of society.
What is equality
300
Production is efficient if the economy is producing at this point (inside, on, or outside) in the Production Possibilities Frontier model.
What is on the PPF.
300
Jake can mow a lawn in three hours or he can trim a tree in one hour. Manny can mow a lawn in four hours or trim a tree in two hours. This person has comparative advantage in lawn mowing. (Show your work!)
Who is Manny
300
These are the five shifters of demand.
What are # of buyers, income, tastes and preferences, price of related goods, and expectations.
300
This will be the result in the market for valentine's chocolates when cocoa beans become more expensive. Describe the change (shift or movement along the curve) and the new equilibrium(increase or decrease in price and quantity).
What is supply will shift to the left. Equilibrium price increases and equilibrium quantity decreases.
400
You want to spend 2 hours studying for this exam by doing practice problems and/or reading flashcards. In the first hour you are able to complete 6 practice problems, but in the second hour you are only able to complete four because you are getting tired. If 5 practice problems will increase you exam grade by the same amount as an hour of studying flashcards, how should you spend your time studying (describe why) ?
Do 6 practice problems in the first hour and spend the second hour studying flashcards. In the second hour the marginal gain from doing practice problems is less than the marginal gain from studying flashcards.
400
The opportunity cost of the tradeoff illustrated in the PPF model is measured in the graph using this mathematical concept.
What is the slope.
400
Candace and Mary are both capable of cooking dinner and washing the car. This is an advantage scenario (combination of absolute and/or comparative for each woman) that is not possible.
What is Candace and Mary both have comparative advantage in cooking dinner (or washing the car).
400
These are the four shifters of supply.
What are input prices, technology, number of sellers and expectations.
400
This will be the result in the market for Chevy Trucks after the Super Bowl ads air. Describe the change (shift or movement along the curve) and the new equilibrium (increase or decrease in price and quantity).
What is demand will shift to the right. Equilibrium price increases and equilibrium quantity increases.
500
A rational decision maker takes an action only if this is true.
What is "marginal benefit is greater than marginal cost"
500
In the PPF model, this is the change illustrated when a technological advance allows the economy to produce good Y more efficiently.
What is all points shift up (vertically) on the y-axis.
500
The gains from trade are created through this process/action. (Description required - why does this create gains?)
What is comparative advantage - specialize in the good that you are relatively more efficient making allowing for a better use of resources (time/other inputs)
500
This is the reason the supply curve slopes upward.
What is (the law of supply) an increase in the output price gives producers an incentive (larger profit margins) to supply a larger quantity.
500
In the market for icecream there is a simulanteous increase in demand and decrease in supply. This is the resulting equilibrium change. Describe the change (shifts or movement along curves) and the new equilibrium (increase or decrease or ambiguous change in price and quantity).
What is the demand curve shifts to the right and the supply curve shifts to the left. The equilibrium price increases, however the effect on equilibrium quantity is ambiguous.