Econ 202 Exam
Deadweight loss
1/2bh little triangle above units below equilibrium
over __________ have a spell of poverty
50 percent
Price Expectations and Demand
Are Opposite
Opportunity Cost Principle
Compare benefits to next best alternative
Cost Benefit-Principle
Compare marginal cost to marginal benefit for each thing separately
Marginal Principle
Consider everything separately
Rational Rule
If something is worth doing, keep doing it until your marginal benefit equals your marginal cost
change in Quantity Supplied
Movement along the curve
Surplus
Quantity Supplied exceeds quantity demanded
Compliments shift...
TOGETHER
smoothers get money
no increase in consumption
Sunk Cost
a cost that has already occurred and cannot be reversed
Change in supply
a movement of the curve itself
Sources of comparative Advantage
abundant inputs, specialized skills, mass production
Voluntary Economic Exchange
buyers and sellers exchange money for goods only if both want to
Social Safety Net
cash assistance, goods and services provided by gov. for bottom of income
Price as a signal
communication between buyers and sellers
increase reserve requirements
contractionary, less money, higher interest rate, less investment
efficient outcome
yields the largest possible economic surplus
frictional unemployment
due to time it takes employers to search for workers, visa versa
Diminishing Marginal Benefit
each item yields a smaller marginal benefit than the previous item
decrease reserve requirements
expansionary, more money, lower interest rate, more investment
Social Insurance:
gov. provided insurance against unemployment, illness, disability, outliving your savings
price as an incentive
high price produce more, consume less for buyers
Deadweight loss
how far economic surplus falls below the efficient outcome
expansionary monetary policy
increase money supple to increase aggregate demand increase GDP
hand-to-mouth gets money
large increase in consumption
wealth is _________ stable than income
less
5 sources of market failure
market power, externalities, information problems, irrationality, government regulations
medium of exchange
money used to buy goods or services
progressive tax
more income pay higher share in income taxes
Shift in Demand
move the curve, due to outlying source
consumer surplus
price- marginal benefit (quantity shown x (price+1))
Shortage
quantity demanded exceeds quantity supplied
Quantity of Supply
quantity supplied higher when price is higher, positive relation
increase/decrease in demand
shift to right or left
hand-to-mouth consumers
spend current income
consumption smoothers
spend permeant income
equilibrium
supply meets demand
money illusion
the tendency to focus on nominal dollar instead of inflation adjusted amounts
Comparative Advantage
to do something at a lower opportunity cost
structural unemployed
wages don't fall to bring labor demand
Marginally Attached
wants a job, has looked, isn't currently looking
law of diminishing results
when one input is held constant, increases in other inputs will begin to yield smaller and smaller increases in output
underemployed
working but wants more hours or job isn't using their skills
recall aggregated demand
y=c+I+g+NM
