Micro exam chapters 1-4
Suppose your job pays $8.37 per hour. Your boss has been impressed with your productivity on the job and offers you a $0.8 per hour raise. What is the percentage change (or growth rate) of your wage?
$0.8/$8.37= .0956 .0956x 100= 9.56 9.56% change/growth rate
What are the two main problems that have caused the demise of the command system?
1. Prices were not determined in the marketplace but were dictated by central planners in communist countries. 2. The government prevented prices from adjusting in the natural way (to supply and demand) it also explains why taxes adversely affect the allocation of resources which in turn distort prices and discourage consumers and producers
What could happen to price and quantity if supply increases but demand decreases? 3 potential answers
1. small change in Demand, large change in Supply 2. Moderate change in D, moderate change in S 3. Large change in D, small change in S
What are positive statements?
It is an assertion about how the world is. Factual
What does it mean to be on the PPC curve?
It is the maximum output and the most efficient level of production. (Dot A)
What does it mean to be outside the PPC curve?
It means that you cannot produce the number of products but doesn't mean it is impossible. Improvements in technology or a gain in resources could contribute to reaching that point. (Point B)
(MICRO or MACRO) More workers are being hired by the nation's businesses.
MACRO
(MICRO or MACRO) The U.S. economy grew at an annual rate of 4.2 percent last year.
MACRO
(MICRO or MACRO) New discoveries in medicine are leading to strong growth in the biotech industry.
MICRO
Explain the difference between micro and macro economics
Micro- the study of how households and firms make decisions and how they interact in specific markets Macro- study of economy-wide phenomena which includes inflation and unemployment
(POSITIVE OR NORMATIVE) The federal government should increase income taxes on the wealthy to reduce the budget deficit.
NORMATIVE
(POSITIVE OR NORMATIVE) The unemployment rate is too high.
NORMATIVE
(POSITIVE OR NORMATIVE) The national economy grew at a 3.2 percentage rate in the last quarter.
POSITIVE
What does rational behavior mean?
People who systematically and purposefully do the best they can to achieve their objective.
Find the slope of an assumed linear demand curve for theater tickets, when persons purchase 100 at $5.00 per ticket and 200 at $15.00 per ticket.
Rise/run 5-15=-10 100-200=-100 -10/-100= .1 Slope equals .1
Shifts of the demand curve? Steel: the government introduces environmental restrictions on the dumping of wastes from producing steel.
Shifts to the left
Shifts of the demand curve? Designer clothes: consumer confidence in the economy improves
Shifts to the right
Shifts of the demand curve? Market for student housing when university enrollment increases and at the same time the university destroys several older residence halls and apartment buildings
Supply decreases and demand increases
Shifts of supply and demand curve? Market for beef when the price of corn (cattle feed) rises and the people become more fearful of mad cow disease
Supply shifts lower quantity and higher price Demand shifts lower quantity and lower price
What is the production possibilities curve?
The PPC is a graph that shows a combination of the output that the economy can produce given the available factors of production and the available production of technology/ resources.
What is the idea of efficiency?
The property of a natural resource allocation of maximizing the total surplus received by all members of society
What is the idea of equality?
The property of distributing economic prosperity uniformly among the members of society
Explain the scarcity concept
The scarcity concept has to do with society that has limited resources and therefore cannot produce all the goods and services people wish to have
What are normative statements?
They are an assertion about how the world ought to be. Opinion
How would you lower the impact of scarcity?
Through the ideas of efficiency and equality
Define opportunity cost
Whatever must be given up to obtain some item
What is an example of rational behavior?
if a person chooses a job with a profile of his liking instead of a high paying job
What does it mean to be inside the PPC curve?
inefficient outcome of products. (Dot C)
