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15 Cards in this Set
- Front
- Back
Opportunity Cost
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put a value on the next best choice or alternative.
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Models
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Done in an abstract way (make things more simple).
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Causation vs. Correlation
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Causation- if "this happens," what will the result be?
Correlation- happen in a pattern |
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Assumptions(help to make things more simple)
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Rationality- assuming with some consistency in behavior
1. People will act in their own self-interest -people tend to learn from their mistakes 2. Marginal Decision Making-thinking @ the margin and picking the choice that will make me better off. |
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Marginal Decision Making Examples
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Examples: Shopping and getting in the fastest line or just waiting. Gas prices and knowing when to get gas.
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What a society needs.....
Questions and Answers |
What to produce?.....Factors of Production
How to produce it (who will produce?) Efficiency in Production, investments, and etc. For whom it is produced? Distribution-positive and normative (Growth/Technology) (Stability) |
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Government Involvement
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1. Efficiency
2. Equity-involve normative judgment (discrimination/poverty). 3. Disaster-give out money to AID disaster areas 4. Economic Stability |
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Demand
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A concept relating quantities of goods/services demanded to relative prices w/in a infinite period of time, ceteris paribus.
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Law of Demand
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There's inverse relationship btwn relative price(not accounting for inflation) & quantity demanded.
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Determinants of Demand
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Q=f(Income, complement & substitute goods, # of population, taste in perferences, EXPECTATION on price, weather
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Income
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Normal- buy more, when income rises, less when income decreases
Inferior- opposite |
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Complements
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If x & y are complements, increase demand for y will cause increase demand for x.
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Substitutes
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Buy one means you don't buy the other.
How much are you willing to pay for something you may or may not really want? Example: Coke or pepsi |
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Law of Supply
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There is a direct relationship btwn relative price and quantity supplied, ceteris paribus.
- ^P>^Qs, decrease P > decrease Qs |
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Quantity Supplied(Qs)
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Qs=f(Px, resources, technology, # of sellers, tax/subsides, EXPECTATIONS)
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