Economics at University Of Groningen | Flashcards & Summaries

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Lernmaterialien für Economics an der University of Groningen

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Microeconomics

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  • The little picture
  • How individuals make decisions and how these decisions interact
  • Manifestations: supply and demand, models of consumers or firms
  • Clear models

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First economic principle

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  1. Choices are necessary because resources are scarce


  • Resources are scarce -> Can´t always get what you want -> Must make choices
  • Resource: Land, Labour (the time of workers), Physical capital (machinery, buildings), Human capital (education, skills of workers), Clean air and water

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The rational rule

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If something is worth doing, keep doing it until your marginal benefits equal your marginal costs.

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Controlling quantities

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  • how much of a good may be bought or sold 

  •   When the quota limit is smaller than the equilibrium quantity in an unregulated market, the demand price is higher than the supply price— there is a wedge between them at the quota limit.

 •  This wedge is the quota rent, the earnings that accrue to the license-holder from ownership of the right to sell the good—whether by actually supplying the good or by renting the license to someone else. The market price of a license equals the quota rent.

 •  Like price controls, quantity controls create deadweight loss and encourage illegal activity.


 


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Pro and Cons for minimum wage?

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In favour

Against

Increase in productivity

Could lead to inflation because products become more expensive

More consumers

From perspective of employer, would have to spend more money

Higher earnings

Many low-wage workers will be fired

Will help the poor

Black market

 

Outsourcing, Off-shoring


-> It all boils down to the price elasticity of demand


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Macroeconomics

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  • The big picture
  • How overall economics works (economic fluctuations, overall ups and downs)
  • Manifestations: employment, GDP, inflation (aggregate variables)
  • More debatable


 


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Production possibility frontier

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The maximum quantity of one good that can be produced for any given quantity produced of the other (trade-off).

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Supply curve

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  • Relationship between quantity supplied and price 
  • Upward sloping (law of supply: as price rises, the quantity supplied rises, other things equal) 
  • Change in quantity supplied (movement along) ≠ Change in supply (shift)

     
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Shifts of the demand curve (5. reasons)

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1. Changes in the prices of related goods or services 

  • Substitutes: Coffee or Tea, Bus or Train
  • Complements: Movies and Popcorn -> Movie tickets are getting more expensive -> fewer people will go to the cinema -> less demand for popcorn

2. Changes in income

  • Normal goods: A rise in income increases the demand for a good
  • Inferior goods: A rise in income decreases the demand for a good

3. Changes in tastes

  • More leisured clothes after WW2, trends

4. Changes in expectations

  • if you expect your income to fall in the future, you are likely to save today and reduce your demand for some goods.

5. Changes in the number and type of consumers:

  • Migration, Increase in Population, trading, baby boom (clothes, school books)

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Consumer surplus

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  • Is the net gain an individual consumer gets from buying a good
  • Is equal to the area below the market demand curve but above the price (price you would pay for a good)
  • Both individual and total consumer surplus
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Why does the government set price controls?

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• Unhappy buyers/sellers

• The equilibrium price is not ‘fair’ (too high or too low)

→ Strong demand for governments to intervene

→ Pressure on the government to intervene


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Why do governments prefer to tax goods with a relatively inelastic demand?

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  • Responsiveness to price changes: demanded quantity won´t change that much
  • Tax revenues: higher tax revenues
  • Total surplus: Also higher

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  • 19619 Karteikarten
  • 379 Studierende
  • 9 Lernmaterialien

Beispielhafte Karteikarten für deinen Economics Kurs an der University of Groningen - von Kommilitonen auf StudySmarter erstellt!

Q:

Microeconomics

A:
  • The little picture
  • How individuals make decisions and how these decisions interact
  • Manifestations: supply and demand, models of consumers or firms
  • Clear models

Q:

First economic principle

A:
  1. Choices are necessary because resources are scarce


  • Resources are scarce -> Can´t always get what you want -> Must make choices
  • Resource: Land, Labour (the time of workers), Physical capital (machinery, buildings), Human capital (education, skills of workers), Clean air and water

Q:

The rational rule

A:

If something is worth doing, keep doing it until your marginal benefits equal your marginal costs.

Q:

Controlling quantities

A:
  • how much of a good may be bought or sold 

  •   When the quota limit is smaller than the equilibrium quantity in an unregulated market, the demand price is higher than the supply price— there is a wedge between them at the quota limit.

 •  This wedge is the quota rent, the earnings that accrue to the license-holder from ownership of the right to sell the good—whether by actually supplying the good or by renting the license to someone else. The market price of a license equals the quota rent.

 •  Like price controls, quantity controls create deadweight loss and encourage illegal activity.


 


Q:

Pro and Cons for minimum wage?

A:

In favour

Against

Increase in productivity

Could lead to inflation because products become more expensive

More consumers

From perspective of employer, would have to spend more money

Higher earnings

Many low-wage workers will be fired

Will help the poor

Black market

 

Outsourcing, Off-shoring


-> It all boils down to the price elasticity of demand


Mehr Karteikarten anzeigen
Q:

Macroeconomics

A:
  • The big picture
  • How overall economics works (economic fluctuations, overall ups and downs)
  • Manifestations: employment, GDP, inflation (aggregate variables)
  • More debatable


 


Q:

Production possibility frontier

A:

The maximum quantity of one good that can be produced for any given quantity produced of the other (trade-off).

Q:

Supply curve

A:
  • Relationship between quantity supplied and price 
  • Upward sloping (law of supply: as price rises, the quantity supplied rises, other things equal) 
  • Change in quantity supplied (movement along) ≠ Change in supply (shift)

     
Q:

Shifts of the demand curve (5. reasons)

A:

1. Changes in the prices of related goods or services 

  • Substitutes: Coffee or Tea, Bus or Train
  • Complements: Movies and Popcorn -> Movie tickets are getting more expensive -> fewer people will go to the cinema -> less demand for popcorn

2. Changes in income

  • Normal goods: A rise in income increases the demand for a good
  • Inferior goods: A rise in income decreases the demand for a good

3. Changes in tastes

  • More leisured clothes after WW2, trends

4. Changes in expectations

  • if you expect your income to fall in the future, you are likely to save today and reduce your demand for some goods.

5. Changes in the number and type of consumers:

  • Migration, Increase in Population, trading, baby boom (clothes, school books)

Q:

Consumer surplus

A:
  • Is the net gain an individual consumer gets from buying a good
  • Is equal to the area below the market demand curve but above the price (price you would pay for a good)
  • Both individual and total consumer surplus
Q:

Why does the government set price controls?

A:

• Unhappy buyers/sellers

• The equilibrium price is not ‘fair’ (too high or too low)

→ Strong demand for governments to intervene

→ Pressure on the government to intervene


Q:

Why do governments prefer to tax goods with a relatively inelastic demand?

A:
  • Responsiveness to price changes: demanded quantity won´t change that much
  • Tax revenues: higher tax revenues
  • Total surplus: Also higher

Economics

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