Podcast
Questions and Answers
What is the primary focus of the Maximin principle?
What is the primary focus of the Maximin principle?
Market failures always self-correct without government intervention.
Market failures always self-correct without government intervention.
False (B)
What is one example of a negative externality?
What is one example of a negative externality?
Pollution
The Maximin principle is based on the ideas of philosopher John ______.
The Maximin principle is based on the ideas of philosopher John ______.
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Match the following terms with their definitions:
Match the following terms with their definitions:
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Why might wealthier individuals or businesses engage in tax avoidance?
Why might wealthier individuals or businesses engage in tax avoidance?
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The Maximin principle is designed to make everyone better off equally.
The Maximin principle is designed to make everyone better off equally.
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What is one government solution to address individual market failures?
What is one government solution to address individual market failures?
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Which of the following is an example of a negative externality?
Which of the following is an example of a negative externality?
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Positive externalities result in the market producing too much of a beneficial good.
Positive externalities result in the market producing too much of a beneficial good.
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What is a government solution for dealing with negative externalities?
What is a government solution for dealing with negative externalities?
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When one party in a transaction has more information than the other, it is called ______ information.
When one party in a transaction has more information than the other, it is called ______ information.
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Which scenario best describes adverse selection in the insurance market?
Which scenario best describes adverse selection in the insurance market?
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Subsidies are a government solution to deal with negative externalities.
Subsidies are a government solution to deal with negative externalities.
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Explain what is meant by a 'death spiral' in the insurance market.
Explain what is meant by a 'death spiral' in the insurance market.
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Match the following concepts with their descriptions:
Match the following concepts with their descriptions:
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According to the provided information, how many haircuts can one employee do per day if there are chairs available?
According to the provided information, how many haircuts can one employee do per day if there are chairs available?
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The marginal benefit is the total benefit an extra sum makes.
The marginal benefit is the total benefit an extra sum makes.
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What is the price of a single haircut according to the provided information?
What is the price of a single haircut according to the provided information?
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A demand curve typically slopes ________ due to the Law of Demand.
A demand curve typically slopes ________ due to the Law of Demand.
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What does a demand curve plot?
What does a demand curve plot?
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If there is a shift in demand, one just moves along the demand curve, according to the information?
If there is a shift in demand, one just moves along the demand curve, according to the information?
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According to the information, if a price increase then what happens to how much is bought?
According to the information, if a price increase then what happens to how much is bought?
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According to the law of demand, if the price of a product decreases, what will most likely happen?
According to the law of demand, if the price of a product decreases, what will most likely happen?
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Marginal benefit increases with each additional unit of consumption.
Marginal benefit increases with each additional unit of consumption.
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What is the primary difference between a movement along the demand curve and a shift of the demand curve?
What is the primary difference between a movement along the demand curve and a shift of the demand curve?
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A good for which demand increases as income rises is called a ______ good.
A good for which demand increases as income rises is called a ______ good.
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If consumer preferences for a product increase, what will happen to the demand curve?
If consumer preferences for a product increase, what will happen to the demand curve?
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An increase in the number of customers in the market will shift the market demand curve to the left.
An increase in the number of customers in the market will shift the market demand curve to the left.
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Name two methods to calculate market demand.
Name two methods to calculate market demand.
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In the long run, which of the following is true for a business?
In the long run, which of the following is true for a business?
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Market supply is found by averaging the supply curves of all the businesses in the market.
Market supply is found by averaging the supply curves of all the businesses in the market.
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What is one reason why marginal costs might increase?
What is one reason why marginal costs might increase?
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If a business's variable costs are greater than its revenue, the business should ______ production in the short run.
If a business's variable costs are greater than its revenue, the business should ______ production in the short run.
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If the price of coffee beans (an input for coffee) increases, what is the likely effect on the supply of coffee?
If the price of coffee beans (an input for coffee) increases, what is the likely effect on the supply of coffee?
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Improved technology typically leads to a decrease in supply.
Improved technology typically leads to a decrease in supply.
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Give an example of a substitute-in-production.
Give an example of a substitute-in-production.
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What is the primary goal of advertising, according to the text?
What is the primary goal of advertising, according to the text?
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When a product becomes unfashionable, its demand curve typically shifts to the right.
When a product becomes unfashionable, its demand curve typically shifts to the right.
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If the price of coffee increases, what will likely happen to the demand for donuts, assuming they are complements?
If the price of coffee increases, what will likely happen to the demand for donuts, assuming they are complements?
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Goods that replace each other are known as _________.
Goods that replace each other are known as _________.
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Which of the following scenarios describes the relationship between substitute goods?
Which of the following scenarios describes the relationship between substitute goods?
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If the price of Uber decreases, then the demand for the bus will also decrease.
If the price of Uber decreases, then the demand for the bus will also decrease.
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How do future price expectations affect current demand?
How do future price expectations affect current demand?
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Study Notes
Econ 1 - Principle Econ Micro
- Introduces microeconomic analysis related to demand, production, competitive and non-competitive product markets, and welfare.
- Includes applications of microeconomic theory in evaluating and forming public policy.
Week 1
-
1/6: Introduction
- Individuals behave differently with various incentives.
- The economy's performance depends on individual behaviors based on constraints.
-
1/8 and 1/10: Inequality, Poverty, and Redistribution
- Extensive economic inequality in the U.S. (income and wealth) described.
- 39% of U.S. households earned less than $25,000 in 2014.
- The average pre-tax income for the top 1% of U.S. earners was $2.7 million in 2014.
- Graphs demonstrate income distribution percentiles for U.S. 2023 households before taxes.
- A percentile shows the percentage of values in a group that are less than or equal to a specific number.
- For example, scoring in the 90th percentile on a test means you did better than 90% of the people who took the test.
Additional Information (Page 2)
- The poorest U.S. households are on the left side of the percentile graph and richest (top 1%) are on the right.
- Information from the graph: 20% of the U.S. population earned $... per year
- The bottom 50% of the U.S. population earn $25.1k a year per household.
- The middle 40% of the U.S. population earns $116k a year per household.
- The top 1% of the U.S. population earn $2.7 million a year.
- Most economists examine data before taxes to understand income generation potential.
Additional Information (Page 3)
- Income inequality has varied over time, showing both periods of increase and decrease.
- Historically, business structures often allowed for income to not be taxed.
- The IRS now prevents this strategy by reviewing corporate earnings.
- Certain tax measures ensure income is taxed appropriately.
Additional Information (Page 4)
- Wealth inequality is more severe in the U.S. than elsewhere.
- The wealthiest 10% of individuals control 70% of the wealth in the U.S.
- The middle 40% control 30% of the wealth in the U.S.
- 50%+ of the U.S. households have no wealth.
- Wealth Inequality graph of the top 10%, Middle 40% and Bottom 50% on how wealth percentages changed since 1980
Additional Information (Page 5)
- People often overestimate the wealth of lower-income groups.
- Ideal wealth distribution describes a theoretical state of equal wealth.
- Factors impacting inequality include: work ethics, social norms, initiative, access to opportunities, financial status, upbringing, educational standards, social capital, and individual behaviors (such as prior savings).
- The impact of intergenerational income mobility, where a child's opportunities are strongly tied to their parents' circumstances
Additional Information (Page 6)
- The level of high-income mobility varies depending on factors such as neighborhoods, social environment, education, and the health related impacts of environmental issues such as pollution.
- Understanding these factors can help explain why disparity and inequality exist
Additional Information (Page 7)
- Absolute poverty: A person's income is so low they cannot meet basic costs like food.
- Relative poverty: A person's income is significantly less than their community/country's average income level.
Additional Information (Page 8)
- Poverty measurement often normalizes for family size and consumption patterns.
- Shared resources within a household can affect income distribution.
Additional Information (Page 9 - 10)
- High income inequality may be related to various factors like race, age, employment status, and family structure
- Government intervention, such as social support programs like unemployment benefits or food stamps, might address market failures and income inequalities, however, these programs may have potential for abuse.
Additional Information (Page 11)
- Social insurance, including unemployment benefits and healthcare can reduce the risk of poverty in many instances
- Tax avoidance results in lower tax revenues and impact the ability of a government to provide social programs.
Additional Information (Page 12)
- In general, market failure often leads to inefficient resource allocation.
- When markets do not function efficiently, government intervention could be needed.
Additional Information (Page 13)
- Externalities are the effects from actions of individuals and businesses that impact others that are not involved in said actions.
- Imperfect or asymmetric knowledge impacts market efficiency, particularly impacting areas like health insurance.
Additional Information (Page 14)
- Adverse selection results in market inefficiency and higher prices.
- Moral Hazard, the reduced incentive to avoid risk due to insurance, decreases accountability in individual decision making.
Additional Information (Page 15)
- Governmental intervention measures in a country to maintain equity can either reduce or increase economic productivity
- Tax rates and taxation measures, especially when too high, influence motivation to work or engage in business activities
Additional Information (Page 16 - 17)
- The balance between equity and efficiency is key to good governmental policies.
- Equity aims to ensure fairness while efficiency emphasizes productive resource allocation.
- Income and wealth distribution are often described using various metrics (like the Palma ratio and the Gini coefficient)
- Understanding changes in income and wealth distribution.
Additional Information (Page 18)
- Methods for measuring inequality focus on different aspects such as wealth, income, discrimination in access to opportunities.
- Government policies can be used to reduce disparities in areas like education or healthcare.
Additional Information (Page 19)
- Understanding of cost/benefit analysis is fundamental in economics.
- Concepts such as cost and benefit include opportunity cost which is the benefit given up.
- The ability to think in terms of the margin (one more) allows for flexible decision-making
Additional Information (Page 20)
- Cost benefit analysis identifies monetary costs, time costs, and non-monetary costs.
- Benefits can have several facets
Additional Information (Page 21)
- Economic surplus refers to the total benefit minus total cost.
Additional Information (Page 22)
- Decisions can be evaluated using the marginal principle with cost benefit to reduce opportunity cost.
Additional Information (Page 23)
- Choices in one market can impact another, and vice versa
Additional Information (Page 24)
- The analysis of marginal principle involves taking cost/benefit analysis considering how one additional unit can impact the outcome of decisions
Additional Information (Page 25)
- Marginal Principle can be applied to everyday decisions such as deciding whether to buy more than one item or to go to a further degree to improve one's career opportunities
Additional Information (Page 26 - 27)
- Businesses' supply illustrates the quantity supplied in relation to the price.
- Increased prices generally lead to increases in the amount of product supplied by producers.
- The Law of Demand and the Supply and Demand curve analysis provides useful tools for understanding market dynamics
Additional Information (Page 28 - 30)
- Demand shifts occur due to: price changes in related goods, consumer income, and tastes and preferences.
- Changes in consumer spending behaviors, tastes and preferences can cause shifts in demand.
- Complement goods and substitutable goods affect demand.
Additional Information (Page 31)
- Future expectations of price changes can also shift demand.
- Network effects occur when a product's value increases as more people use it
Additional Information (Page 32)
- Market demand is the sum of individual demands.
Additional Information (Page 33)
- Businesses' individual supply curves show how much they'll supply at various prices, reflecting the trade-offs and costs of production.
- Recognizing how prices influence production decisions.
Additional Information (Page 34)
- The market supply curve.
- Plotting data and illustrating relationships to identify trends
Additional Information (Page 35)
- Businesses will sell/produce more when the price is higher than the marginal costs.
- Recognizing that variable costs influence marginal costs.
Additional Information (Page 36)
- The concept of fixed costs and variable costs and relationship with short-run and long-run production
- Understanding costs to derive supply curves.
Additional Information (Page 37)
- Aggregate supply curves for a market can be determined by combining all individual supply curves.
- Shifts in supply curves reflect changes in factors other than price, such as input costs, technology, or the number of sellers.
Additional Information (Page 38 - 39)
- Equilibrium, elasticities, government regulations in these markets.
- Labor market analysis
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Description
Test your understanding of key concepts in economics, particularly those related to market failures and externalities. This quiz covers principles such as the Maximin principle, adverse selection, and government solutions to market inefficiencies. Perfect for students studying economics at various levels!
