Microeconomics Exam #1 Test Review
Latin for "all else equal"?
Ceteris Paribus (e.g. Law of (D)emand - Price goes up- Quantity goes down, C.P.)
If Price E goes up and Quantity F goes down then is F a substitute or complement?
Compliment
What is the name of Dr. Thorston Veblen's Theory that challenges the Law of Demand
Conspicuous Consumption
What is Economic Theory? Economic Model?
Economic Theory-Vague Opinion (e.g. Law of Demand) Economic Model-More elaboration on a theory using an equation or graph (e.g. P=12-3Q)
Contrast between Efficiency and Equity.
Efficiency-(Micro) Maximize Profit Equity-(Macro) Being fair to all (consumers and businesses)
3 Factors (Resources) of Production
L - Land and Building N - Labor K - Capital = Machinery and Equipment
Contrast between Law of Demand and Law of Supplied
Law of D - Price Up-Quantity Down , C.P. Law of S- Price Up- Quantity UP, C.P.
Contrast Micro- and Macro-economics
Micro-study of economics 1 firm at a time Macro-study of economics in the aggregate
Contrast between Normal Goods and Inferior Goods.
Normal Goods - Income (up)- Quantity (up) or Income (down) - Quantity (down) Inferior Goods - Income (up) - Quantity (down) or Income (down) - Quantity (up)
P=113-33.2Q What is the dependent variable, independent variable, slope and intercept?
P is dependent of Q Q is independent 113 is the intercept -33.2 is the slope of the curve
Whats Positive Economics? Normative Economics?
Pos. Econ. - What is (fact) Norm. Econ. - What should be (opinion) (e.g. Law of Demand)
Contrast between Productive Efficiency and Allocative Efficiency
Productive Efficiency - Best Mixture of L,N,K to achieve Q* (optimal quantity) Allocative Efficiency - Matching Q* to societies demand
If Price of A goes up and Quantity of B goes up then is B a substitute or complement?
Substitute
If Price of C goes down and Quantity D goes down then is D a substitute or complement?
Substitute
Contrast between a Time Series and Cross Sectional graph
Time Series has weak causation and high correlation Cross Sectional has high causation and weak correlation
What is Opportunity Cost?
Value of of the best Alternative for gone
What are the two factors of Scarcity?
(1) Limited Resources (2) Unlimited Human Wants
3 Basic Questions
(1) What to produce (2) How to produce (3) Who to sell it to
Give 4 of 7 reasons for [change in supply (shift)]
(1)*Expectations regarding future prices (2)*Prices of substitutes/compliments (3)technological advancements (4)Input Prices (L,N,K) (5)Taxes + Subsidies (6)Natural Disasters (7)# of sellers
4 of 5 Reasons for a [change in Demand (shift)]
(1)*Price of substitutes/complements (2)*Expectations regarding future prices (3)Income (4)Taste Changes (5)# of buyers
(a)Who is the Father of Economics? (b) In the year 1776, what is the name of book he wrote? (c) What is the main premise?
(a) Adam Smith (b) Wealth of Nations (c) Invisible Hands (society) guides commerce
(a)What is David Ricardo's Theory? (b)How should we approach a commitment according to his theory?
(a) Nations should specialize and trade (b)State the specialize and trade combo for each nation that will get them beyond their PPF
(a)What is Absolute Advantage? (b)Comparative Advantage?
(a) Whoever is better (b) Who is least sad OR Happiest when switching production
(a)Who is the father of Mathematical Economics (b)Whats another Name for a Supply and Demand Curve?
(a)Alfred Marshall (b)Marshallian Cross