Microeconomics Exam 1

production possibilities frontier assumptions

1. only 2 goods are produced 2. resources are fixed 3. no changes in technology 4. no economic growth

change in quantity demanded vs change in demand

A change in demand is when the whole curve shifts and a change in quantity demanded is movement along the demand curve due to a change in price. Price Doesn't shift the curve.

change in quantity supplied vs change in supply

A change in quantity supplied reflects a move along a supply curve as price changes

shortage

A situation in which quantity demanded is greater than quantity supplied

surplus

A situation in which quantity supplied is greater than quantity demanded

macroeconomics

The study of the economy as a whole (global economics)

straight vs bowed ppf

When the PPC is a straight line, opportunity costs are the same no matter how far you move along the curve. When the PPC is concave (bowed out), opportunity costs increase as you move along the curve. When the PPC is convex (bowed in), opportunity costs are decreasing.

law of demand

as price increases, quantity demanded decreases and visa versa

marginal decision making

comparing MB to MC

circular flow diagram participants

households, factor markets, firms, goods and services markets

circular flow diagram

https://www.researchgate.net/figure/The-circular-flow-model-that-depicts-the-interrelationship-between-households-and_fig4_241767210

adjustment to equilibrium

increase price for shortage decrease price for shortage

The distinguishing feature of economic capital (as opposed to financial capital, like money) is that it

is productive

What are the factors of production?

land, economic capital, labor, entrepreneurship

Scarcity

means that there are never enough resources to satisfy all human wants

what factors determine demand

price, income, prices of related goods, tastes and preferences, expectations, number of buyers

what factors determine supply

price, input prices, technology, expectations, taxes and subsidies, number of sellers

Society gains advantages through trade because of its ability to

specialize resources to the uses where opportunity cost is minimized.

absolute advantage

the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

what is supply

the amount of a good or service produced

production possibilities frontier

the line on a production possibilities graph that shows the maximum possible output

microeconomics

the study of individuals and firms

In the case of an negative relationship between two variables, all else remaining constant

the value of the two variables will move in opposite directions from each other.

Economists would say that the decisions we make are influenced by

trade offs

opportunity cost

what you give up in order to get something

what is the equilibrium

where the supply and demand curves intersect

When creating a graph for your economics course, which axis is most commonly used to represent price (p)?

y axis