Ecs1601 may 2013 exam solution and question paper

Ecs1601 may 2013 exam solution and question paper
scarcity - -all resources are scarce, we must make choices about how we will use them

--opportunity cost - -the value of the next best option or what we give up when we choose
the first best option

--rational self interest - -concept that people tend to act in ways that benefit them

--positive economics - -the way the world is (economically)

--normative economics - -the way we believe the world ought to be (economically)

--simple trade - -when two parties voluntarily exchange goods, creating value and both
parties are benefiting

--production possibilities frontier - -a graph of the potential production capabilities of a
certain producer, reaches max efficiency on the curve, inefficient below it, and impossible
above it

--the law of demand - -as price increases, quantity demanded decreases
as price decreases, quantity demanded increases

--the law of supply - -as price increases, quantity supplied increases
as price decreases, quantity supplied decreases

--change in quantity demanded - -a shift along the existing demand line

--change in quantity supplied - -a shift along the existing supply line

--equilibrium - -where supply and demand cross on the graph, efficient for both supply and
demand

--what if both supply and demand curves move simultaneously - -draw the graph, one will
rise/fall the other will be indeterminate

--consumer surplus - -area above equilibrium point, the difference between what a
consumer is willing to pay and actually pays

--producer surplus - -area below equilibrium point, the difference between what price a
producer is willing to sell at and what they actually sell at

--total surplus - -consumer surplus + producer surplus

--efficiency - -when there is no way to reallocate goods to make total surplus bigger

--price ceiling - -a max price for a good set by the government

, --price floor - -a minimum price for a good set by the government

--shortage - -when quantity demanded exceeds quantity supplied

--surplus - -when quantity supplied exceeds quantity demanded

--deadweight loss - -consumer or producer surplus that is lost (inefficient)

--Elastic - -when a price change results in a quantity demanded change also

--Inelastic - -when a price change doesn't result in a quantity demanded change

--market failure - -when individuals acting rationally in self interest results in an outcome
that is inefficient or irrational

--monopoly - -a lack of competition where one firm dominates the market

--public goods - -non-rival and non-excludable goods like a public park

--positive externality - -when an individuals actions impose value increasing benefits onto a
non-consenting 3rd party

--negative externality - -when an individuals actions impose value decreasing costs onto a
non-consenting 3rd party

--tragedy of the commons - -a good that everyone may use but no one takes care of due to
expecting the next to do so, becomes exploited

--tragedy of the anti-commons - -when too many people in power stop someone from
exploiting a good that gets ruined in the process

--information problem - -when one party of a trade is unable to gain trustworthy
information about the trade/good

--public interest view - -government is designed to use officials to take voter preferences
and make them into legislation

--public choice view - -government is made up of self-interested individuals who act
rationally through incentives created by legislature

--rational ignorance - -choosing not to learn about something due to high cost and low
benefit

--market process - -the economic process that tends to reach beneficial outcomes

--political process - -the economic process that tends to not reach beneficial outcomes ):