ECO300

Question 1

10 principles of economics

Answer 1

1)people face tradeoffs
2)Cost of something is what you give up getting it
3)People respond to incentives
4)Rational people think about marginal change
5)Trade can make everyone better off
6)Market is the best way to organize economic activities
7)Governments can sometimes improve market outcome
8)A country’s standard of living depends on its ability to produce things others want to buy
9)Prices rise when the government prints too much money(Inflation)
10)Society in the short-run experiences tradeoff between inflation and unemployment

Question 2

Microeconomics

Answer 2

The study of the economic choices individuals and firms make and how these choice create markets and affect welfare

Question 3

PPF (Production Possibility Frontier)

Answer 3

A graph showing all possible combinations of goods that can be produced with fixed resources

Question 4

what is slope

Answer 4

the direction of a line on a graph; shows the change in Y that results from a unit change in X

Question 5

How many types of slopes are there?

Answer 5

4:
-Negative Slope
-Positive Slope
-Zero Slope
-Undefined Slope`

Question 6

optimal choice

Answer 6

The optimal consumption position is where the indifference curve is tangent to the budget line

Question 7

Utility ***

Answer 7

The pleasure or satisfaction that people get from their economic activity

2 goods: U(x,y)

Question 8

what is Cardinal utility

Answer 8

numerical value to the products that consumers chose or chose not to consume.

Question 9

ordinal utility

Answer 9

measures the preferences of consumers

Question 10

indifference curve

Answer 10

graphical representation of different combinations of two groups where a consumer experiences level of satisfaction or utility

Question 10

perfect substitute

Answer 10

a production process where inputs can be swapped out for each other at a constant rate

Question 11

Marginal rate of substitute

Answer 11

measures the slope of the indifference curve

rate of opportunity cost

dx2/dx1

Question 12

Budget constraint (math and he wants graph)

Answer 12

the limit that income places on the combinations of goods that an individual can buy

Consumer’s consumption bundle by (x1, x2)
The price of the two goods, (p1, p2)
The amount of money consumers have to spend is M/W.

Question 13

practice the budget line graphical expression***

Answer 13

P(x)X+P(y)Y = M
P(x)/Py)=slope

Question 13

demand curve

Answer 13

graph that illustrates the relationship between the price of a product or service and the quantity demanded consumed or a specific time period

Question 14

demand function

Answer 14

A representation of how quantity demanded depends on prices, income and preferences

Question 15

perfectly inelastic demand

Answer 15

consumers are unresponsive to price change

-think insulin(nessecity)

Question 16

income and substitute effects of falling price

Answer 16

when price of a good falls or income rises, utility-maximizing choice shifts

Question 16

Consumer Vs Producer surplus*****

Answer 16

CS:extra value individual receives from consuming a good over what they pay for it. Above P*

PS: the same just income earned for selling

Qs=Qd to find P$ then plug into Qs or Qd

CS&PS=1/2 bh

Question 17

Risk taker vs risk aversion

Answer 17

taker: enjoys taking risks

aversion: avoids risk

Question 18

risk neutral

Answer 18

willing to accept fair gamble

indifferent too certain outcomes

Question 19

diversification

Answer 19

Do not put all the eggs in one basket

Question 20

call option vs put option

Answer 20

is buying long term (Bull) buy at a set price
put is buying short term (Bear)
sell at a set price

Question 21

4 basic elements of game theory (no defini

Answer 21

-players
-strategies
-payoffs
-information

Question 22

Dominant strategy

Answer 22

produces the highest payoff among all possible strategies for a player no matter what the other player is doing.

Question 23

prisoners dilemma***

Answer 23

practice

Question 24

Nash equilibrium

Answer 24

A set of strategies, one for each player, that are each the best response against one another.