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- author "KM"
- tags "Macro Exam 1"
- description ""
- fileName "Macro Economics"
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- Define scarcity
- Limited resources for unlimited wants
What does an entrepreneur do
Combines labor, land, and capital to produce goods
What will the market naturally hit
Equillibrium point- supply meets demand?
What are economic goods
Scarce goods from scarce resources
What is an economy
Total sum of product and service transactions of value between two agents in a region
What are trade offs
What am I giving up to get something
Define opportunity cost
- X dollars, nets X goods
- Low hanging fruit easier than top of the tree, diminished returns from resource precurement
Define marginal cost
What does it cost to get X more goods
What is the production possibility frontier
I can produce X of those or X of these, or a smaller quantity of both
Where does productive efficiency fall on a graph
- Anywhere on curve due to cost of procurement
- Inside of curve is inefficient
What is the rule of rational choice
To prosper people alter behavior if the marginal benefit out weighs marginal cost
What are net benefits
Sum of gain after subtracting loss
What is optimal level
- Getting the most good for the least
At What point does the opportunity cost outweigh the op benefit?
Effect marg benifit vs effect marg cost [E(MB) vs E(MC)]
What is positive incentive
Increase benefit or reduce cost
What is negative incentive
Reduce benifit or increase cost
What is specializing/specialization
- Limit expenditures by limiting diversity thus reducing entrance and production costs
- Via trading too
What is comparative advantage
- Producing goods or services at a lower opportunity cost than other goods or services
- Offered by specialization
What is allocative efficiency
- Partitioning resources to optimize production and reach production possibility forntier
- Where marginal cost and marginal benefit meet(?)
What is marginal benefit
- Your return for your expenditures
- What you are willing to give for a result
Why does market failure happen
Economy doesn't efficiently allocate resources independently
How much the economy can produce effeciently vs how it's distributed
- What good to make
- How to make it
- Who will get it
Is correlation equal to causation?
Affect of positive or negative loss?
It does or doesn't cause problems with aggregation
What is fallacy of composition
What is true for one doesn't mean true for all
Is it how do people behave or how should people behave
How DO people behave
What is positive analysis
- Object, value
- Free approach
What are normative statements
Involve subjective judgements
What causes a majority of disagreements?
Normative prescribes, more than positive describes (?)
What is economics
Study of using our resources for wants and desires
What forces us to choose?
What is the economic problem
Scarcity forces us to choose between what wants and needs we have the resources to acquire
What is rational behavior
People do the best they can, based on values and info, under current and estimated circumstances
What is theory
Explanation that accounts for known facts or phenomena
Distance from simplification
Fits in a repeatable and meaningful way with the data
Understanding economics requires facts to be selected and arranged in a...
What is ceteris paribus
- Letting everything else be equal
- Holding everything else constant
- Allows the abstraction of relevant facts from otherwise complex situations that would require a story to frame the facts
What does human behavior make harder?
Why are generalizations that allow predictions harder in social science?
Because of human behavioral variables
What behavior is easier to predict and why?
Group behavior is easier to predict than individual because more general spread of specific personal variable
Decision making of orgs or households
Aggregate (total) economy as they influence society
When is it labor intensive
When is it captial intensive
What is a product market
Buyers of goods
What is a factor or input market
People sell their labor, land, capital, and entrep
What is the circular flow?
Us to Business, Business to Us, etc.
Opposite of goods,items we dont desire or want
Voting with your money
Goverment plans everything
Markets plans itself
Government and market plan the market
Optimal level (correct)
Getting the most good for the keast bad
Supply and demand
Price goes up as quantity goes down and vice versa equilibirum acheived by natural market correction
When the marginal cost of goods is less than their marginal benefit, efficiency of effort, making too much costs too much without giving the same value
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