ECO 1304 Study Guide - Midterm Guide: Ceteris Paribus, Planned Economy, Market Economy

142 views12 pages

tancricket878

3 Dec 2016

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

Chapter 1: the role & method of economics. The study of the allocation of our scarce resources to satisfy our unlimited wants. Resources: inputs (human effort/skill, land + machines/factories) used to produce g+s. The economic problem: scarcity forces us to choose & choices are costly bc we must give up other opportunities that we value. The scarce resources used in the production of goods and services are: Land: the total of both the physical and mental effort expended by people in the production of goods and services. Labour: the total of both the physical and mental effort expended by people in the production of goods and services. Capital: the equipment and structures used to produce g+s: buildings, tools, machines, and factories: also includes human capital: the productive knowledge and skill people receive from education and training, for which they are paid.

Related Questions

Need help revising, and recommendation for a conclusion.

Throughout this paper is my understanding of what I have learned in class chapters 1-4, expressing my understanding and opinions. Economics is the study of how we deal with scarce resources. Microeconomics specially deals with business in the home country exclusively. This type of economics affects small businesses in the home country only. On the other hand, macroeconomics concerns our national welfare concerning trade and international business.

I believe that many things affect our economy on a microeconomics level. Things such as our understanding of our country in reflection to the world are very important. That is why we study ourselves before we study the macroeconomic principle of the world. Understanding ourselves is what microeconomics teaches us. Working from the inside out. The world is a place where there are differences in our wants and what we get. That is what makes items scarce. That is what positive economics is. Positive economics deals with what is and what we have. The other type of economics is called normative statements. This deals with what we should receive instead of what is and deserved to some extent. It's our scarce resources that determine our allocation of resources and how we use our resources and time. This is where opportunity costs come in, giving up something to do something. A successful business or country never ignores opportunity costs. We must ensure that we have a comparative advantage instead of the absolute advantage. Our resources must be used to achieve maximum output. Comparative is met when we have fewer opportunity costs to make some certain products than the other person or entity.

My initial understanding was scarcity was oil potentially running out, but we have so much of it that you can always find more with techniques such as fracking. Now it's obvious to me, one of our most scarce resources is time. You cannot avoid the 8,760 hours in a year. I understand that people have unlimited wants but limited resources. Everything has a cost and we must make a choice as we don't have unlimited farms, factories workers, etc. scarcity forces choices and this ties in with opportunity cost, for every gun made, a theft from the hungry is made. The opportunity cost not being used to feed the poor, but to make guns. And I find it easy to understand no one can have everything choices must be made on benefits. If I'm going to school, imp giving up making cash, as I'm giving up money for an education, I value education more. Scarcity is also related to the invisible hand. As it's an achievement that leads free markets and capitalism through competition for scarce resources.

My understanding of the invisible hand is a person neither intends to promote public interest and does not know how much he is promoting it. Only intending on his own gain. Without being his intention a person can be lead by the invisible hand to do good for society by pursuing one's own self-interest. Going into equity and efficiency the invisible hand does ensure both equity and efficiency. People work in their selfish ways to maximize profit while also contributing to the economy as a whole. It can also be argued that as the invisible hand wants to ensure efficiency, it cannot guarantee efficiency, because it can fail to produce an efficient allocation of resources, which in turn lead to a market failure. It can also be argued that it can't guarantee equity because not everyone gets a fair price. The way I like to remember efficiency is with a real-life example, like a reduction in the number of workers needed to produce a particular good for a particular amount. Equity refers to the ownership interest in an asset, for example, if a person owns a house with a market value of $800,000 and owes $100,000 on the mortgage leaving a $700,000 equity in the home.

It can be predicted that if the price of beef increases - ceteris paribus-the quantity of beef demanded by buys will decrease. In other words, if the price of beef increases, then the quantity of beef increases, then the quantity of beef demanded will decrease because all things have to be equal. In-class lecture thought me all other things remaining the same. Economists use ceteris paribus to determine the effect of a factor when all other factors have been held the same and helps simplify the study and get a more refined data set.

Economists deal with many issues that pertain to assuring that both a countries domestic output is efficient and that there is an effective trade balance. This means that there are a balance and limit on the amount of imports. Also, this means home production must be able to meet export demands. There are many factors that affect the production of goods and their effect on shifting the production possibilities frontier. This involves evaluating every detail including knowing the products and any close substitutes and compliments. It also involves knowing how an action or other external force will affect demand. This is called price elasticity; Substitutes are products that can replace any given product or service. An example of this would be Coke and Pepsi. The presence of substitutes affects price elasticity because if there are other options, then any change to the price or quality of the product will cause a shift of the demand curve. O course, price is a huge reason why the demand for a product decreases or increases yet it doesn't shift the curve because of the price only. This price change will cause a domino effect that will end with the shifting of the demand curve because it will cause an increase or decrease in demand of the substitute good if the price change is either lower or higher respectively. This price change serves as a catalyst that will change people's desire to spend more money on a more expensive product and that will instead choose to buy the substitute good for cheaper or buy more of the desired product. The change in the price of actual products will not shift the demand curve yet the change of the price of substitutes will because it serves to change people's purchasing behavior. On the other hand, compliments serve to boost demand when there is a decrease in price. The use of complementary goods is dependent upon another product. An example of this would be hot dogs and buns. If the price of hotdogs decreases then, conversely, the demand for hot dog buns will increase because of this change in price. In this scenario, the decrease in price will cause a positive shift in the demand curve because of people's desire and willingness to buy more buns. This is an example of a demand shifter. There are a few other demand shifters. The shifters of the demand curve are changes in expectations, disposable income, price of substitute goods and complements, tastes and preferences, and population size and composition. Changes in income affect the demand curve because if income is lower then people tend to save any extra income instead of wasting it. Disposable income is minimized and spending is lower. This also causes people to see a perceived value of things and distinguishing between what is necessary and what is a relative luxury. The lower the income, the higher the saving and avoidance to spend. An example of this would be if someone needs to buy some medication and it is relatively expensive, that doesn't mean that someone won't buy the medication just because it is expensive. It is necessary. Other factors that contribute to spending and demand are having a price ceiling and price floor. Having a price ceiling is a limit on the price of the product this is a government-imposed idea that is meant to protect consumers from unfair pricing and other conditions that may be malicious or obscure. This affects demand because if there is a price ceiling there is a limit on profit on a unit-to-unit basis. The other factor is the price floor. This price floor was created to encourage competition and affect consumers' willingness to pay because sometimes this new price may be higher than the original price. This causes a negative impact on a product that has a less than wanted perceived value. Many factors contribute to economic prosperity and certainly do help assure that information is analyzed and implemented into an economic and business plan.

limejellyfish231

1. Which of the following groups of countries are all advanced economies?

		Hong Kong, Japan, France, and the United Kingdom
		Italy, the United States, China, and Russia
		Singapore, Russia, France, and Chad
		Australia, Brazil, and the United States

QUESTION 2

1. The most people live in ________ economies and the fewest people live in ________ economies.

		developing; emerging market
		advanced; emerging market
		emerging market; developing
		advanced; developing

QUESTION 3

1. Households and firms in the U.S. economy interact with those in the rest of the world in the ________ market and the ________ market.

		goods; financial
		government; goods
		goods; factor
		financial; factor

QUESTION 4

1. As a factor of production, oil reserves are counted as

		labor.
		capital.
		entrepreneurship.
		land.

QUESTION 5

1. ________ the owners of the factors of production, while ________ what amounts of those factors to hire.

		Households are; the government determines
		Firms are; households that determine
		The government is; firms determine
		Households are; firms that determine

QUESTION 6

1. The emerging market economies are

		the nations that are currently agricultural in nature.
		most of the nations of Western Europe.
		the largest grouping including the nations of China and India.
		in the transition from state-owned production to free markets.

QUESTION 7

1. In the United States, the productive factor that, as a group, receives the largest fraction of the nation's total income was

		consumption of goods and services.
		entrepreneurship.
		capital.
		labor.

QUESTION 8

1. Items bought by individuals to provide personal enjoyment are termed

		personal goods.
		consumption of goods.
		consumption or investment goods.
		standard goods.

QUESTION 9

1. In the advanced economies, ________ of the factories use advanced capital equipment and in the developing economies ________ of the factories use advanced capital equipment

		virtually all; none
		some; some
		virtually all; virtually all
		virtually all; some

QUESTION 10

1. The productive resource that includes all the "gifts of nature" is called

		land.
		labor.
		entrepreneurship.
		capital.

QUESTION 11

1. What would be an example of government good?

		Donald Trump purchases furniture for his office.
		Antonio, the manager of the local Taco Hut, purchases a new deep fryer.
		The local driver's license office purchases a new digital camera and printer.
		Jake buys an iPhone.

QUESTION 12

1. The world population is approximately ________ people.

		2 trillion
		680 million
		6.8 billion
		6.8 million

QUESTION 13

1. Computers and insurance coverage produced in the United States and sold to people in other nations are categorized as

		U.S. exports of goods and services.
		U.S. government goods and services.
		foreign capital goods.
		U.S. consumer goods and services.

QUESTION 14

1. Of the following, the federal government obtains most revenue from

		corporate income taxes.
		excise taxes.
		sales taxes.
		social security taxes.

QUESTION 15

1. Items bought by businesses to help produce other goods and services are called

		capital goods.
		government goods and services.
		consumption of goods and services.
		exports of goods and services.

QUESTION 16

1. The majority of the income earned in the United States is paid in

		profit.
		interest.
		rent.
		wages.

QUESTION 17

1. Dan missed class the day the professor covered the circular flow model. Dan asked his friend Joan to explain markets to him. Joan correctly stated that a market

		must include a written contract between buyers and sellers.
		requires a physical location for buyers and sellers to get together.
		is only a place to purchase groceries.
		is an arrangement that brings buyers and sellers together.

QUESTION 18

1. The United States possesses a large amount of human capital. As a result of this fact, in the United States, there is a

		highly skilled and educated labor force.
		a large number of kind and generous humans.
		a large number of people and a great deal of land.
		a large amount of machinery and equipment.

QUESTION 19

1. Which of the following correctly lists the categories of factors of production?

		labor, machines, buildings, capital, and entrepreneurship
		land, buildings, capital, and entrepreneurship
		land, labor, capital, and entrepreneurship
		forests, fish, buildings, capital, and entrepreneurship

QUESTION 20

1. Which of the following correctly lists the categories of factors of production?

		capital, money, and labor
		hardware, software, land, and money
		land, labor, capital, and entrepreneurship
		machines, buildings, land, and money

QUESTION 21

1. In the United States, the poorest 20 percent of households receive roughly ________ percent of total income.

		10
		3
		15
		20

QUESTION 22

1. What would be an example of a consumption service?

		Jake buys an iPhone.
		The local driver's license office purchases a new digital camera and printer.
		Antonio, the manager of the local Taco Hut, purchases a new deep fryer.
		Rhianna gets a haircut.

QUESTION 23

1. The total value of capital in the United States is around

		$47 trillion.
		$10 trillion.
		$100 trillion.
		$79 trillion.

QUESTION 24

1. An export good is a good produced

		by foreigners in the United States and purchased by U.S. households.
		in another country and purchased by U.S. residents.
		in the United States and sold to foreigners living in the United States.
		in the United States and sold in other countries.

QUESTION 25

1. ________ paid for the use of land; ________ paid for the services of labor; and ________ paid for the use of capital.

		Interest is; wages are; profit is
		Rent is; wages are; interest is
		Rent is; interest is; wages are
		Mortgages are; interest is; wages are

fuchsiareindeer89

1. Which of the following groups of countries are all advanced economies?

		Hong Kong, Japan, France, and the United Kingdom
		Italy, the United States, China, and Russia
		Singapore, Russia, France, and Chad
		Australia, Brazil, and the United States

QUESTION 2

1. The most people live in ________ economies and the fewest people live in ________ economies.

		developing; emerging market
		advanced; emerging market
		emerging market; developing
		advanced; developing

QUESTION 3

1. Households and firms in the U.S. economy interact with those in the rest of the world in the ________ market and the ________ market.

		goods; financial
		government; goods
		goods; factor
		financial; factor

QUESTION 4

1. As a factor of production, oil reserves are counted as

		labor.
		capital.
		entrepreneurship.
		land.

QUESTION 5

1. ________ the owners of the factors of production, while ________ what amounts of those factors to hire.

		Households are; the government determines
		Firms are; households determine
		The government is; firms determine
		Households are; firms determine

QUESTION 6

1. The emerging market economies are

		the nations that are currently agricultural in nature.
		most of the nations of Western Europe.
		the largest grouping including the nations of China and India.
		in the transition from state-owned production to free markets.

QUESTION 7

1. In the United States, the productive factor that, as a group, receives the largest fraction of the nation's total income was

		consumption of goods and services.
		entrepreneurship.
		capital.
		labor.

QUESTION 8

1. Items bought by individuals to provide personal enjoyment are termed

		personal goods.
		consumption of goods.
		consumption or investment goods.
		standard goods.

QUESTION 9

1. In the advanced economies, ________ of the factories use advanced capital equipment and in the developing economies ________ of the factories use advanced capital equipment

		virtually all; none
		some; some
		virtually all; virtually all
		virtually all; some

QUESTION 10

1. The productive resource that includes all the "gifts of nature" is called

		land.
		labor.
		entrepreneurship.
		capital.

QUESTION 11

1. What would be an example of government good?

		Donald Trump purchases furniture for his office.
		Antonio, the manager of the local Taco Hut, purchases a new deep fryer.
		The local driver's license office purchases a new digital camera and printer.
		Jake buys an iPhone.

QUESTION 12

1. The world population is approximately ________ people.

		2 trillion
		680 million
		6.8 billion
		6.8 million

QUESTION 13

1. Computers and insurance coverage produced in the United States and sold to people in other nations are categorized as

		U.S. exports of goods and services.
		U.S. government goods and services.
		foreign capital goods.
		U.S. consumer goods and services.

QUESTION 14

1. Of the following, the federal government obtains most revenue from

		corporate income taxes.
		excise taxes.
		sales taxes.
		social security taxes.

QUESTION 15

1. Items bought by businesses to help produce other goods and services are called

		capital goods.
		government goods and services.
		consumption of goods and services.
		exports of goods and services.

QUESTION 16

1. The majority of the income earned in the United States is paid in

		profit.
		interest.
		rent.
		wages.

QUESTION 17

1. Dan missed class the day the professor covered the circular flow model. Dan asked his friend Joan to explain markets to him. Joan correctly stated that a market

		must include a written contract between buyers and sellers.
		requires a physical location for buyers and sellers to get together.
		is only a place to purchase groceries.
		is an arrangement that brings buyers and sellers together.

QUESTION 18

1. The United States possesses a large amount of human capital. As a result of this fact, in the United States, there is a

		highly skilled and educated labor force.
		a large number of kind and generous humans.
		a large number of people and a great deal of land.
		a large amount of machinery and equipment.

QUESTION 19

1. Which of the following correctly lists the categories of factors of production?

		labor, machines, buildings, capital, and entrepreneurship
		land, buildings, capital, and entrepreneurship
		land, labor, capital, and entrepreneurship
		forests, fish, buildings, capital, and entrepreneurship

QUESTION 20

1. Which of the following correctly lists the categories of factors of production?

		capital, money, and labor
		hardware, software, land, and money
		land, labor, capital, and entrepreneurship
		machines, buildings, land, and money

QUESTION 21

1. In the United States, the poorest 20 percent of households receive roughly ________ percent of total income.

		10
		3
		15
		20

QUESTION 22

1. What would be an example of a consumption service?

		Jake buys an iPhone.
		The local driver's license office purchases a new digital camera and printer.
		Antonio, the manager of the local Taco Hut, purchases a new deep fryer.
		Rhianna gets a haircut.

QUESTION 23

1. The total value of capital in the United States is around

		$47 trillion.
		$10 trillion.
		$100 trillion.
		$79 trillion.

QUESTION 24

1. An export good is a good produced

		by foreigners in the United States and purchased by U.S. households.
		in another country and purchased by U.S. residents.
		in the United States and sold to foreigners living in the United States.
		in the United States and sold in other countries.

QUESTION 25

1. ________ paid for the use of land; ________ paid for the services of labor; and ________ paid for the use of capital.

		Interest is; wages are; profit is
		Rent is; wages are; interest is
		Rent is; interest is; wages are
		Mortgages are; interest is; wages are

ivorybear711

ECO 1304 Study Guide - Midterm Guide: Ceteris Paribus, Planned Economy, Market Economy

Document Summary

Get access

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related Documents

ECO 1304 Chapter Notes - Chapter 1: Comparative Advantage, Planned Economy, Market Economy

ECO 1304 Lecture Notes - Lecture 1: Opportunity Cost

ECO 1304 Lecture Notes - Lecture 7: Mixed Economy

Related Questions