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CAS EC 101 Lecture Notes - Lecture 25: Budget Constraint, Indifference Curve, Opportunity Cost

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coralcaribou304
1 Nov 2018
School
Boston University
Department
Economics
Course
CAS EC 101
Professor
Bruce Watson

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CAS EC 101 Lecture Notes - Lecture 24: Concentration Ratio, Oligopoly, Strategic Dominance

25

CAS EC 101 Lecture Notes - Lecture 25: Budget Constraint, Indifference Curve, Opportunity Cost

26

CAS EC 101 Lecture Notes - Lecture 26: Equilibrium Point, Marginal Cost, Marginal Revenue Productivity Theory Of Wages

Document Summary

Households supply labor and raw materials in exchange for salary and wages from the firms in order to buy other goods and services. Money (salary and wages) is only a medium of exchange, the only value of money is what we assign to it. The money that you make allows you to buy other goods. Factor production: a good or service that is used to produce another good or service. Money is just a means of exchange, therefore the money that u make only allows u to buy stuff, which is why the tradeoff for leisure is the other goods you can buy. The labor supply curve is determined by the budget constraint and the indifference curves. The slope of the budget constraint in the labor supply model is the equal to negative of the wage. Indifference curves are determined by the amount of utility you get from the amount of leisure time and and the amount of other goods.

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Related Questions

1. __________, a term referring to the fact that for many good, as the level of production increases, the average cost of producing each individual unit declines.
a. Economies of scale
b. Specialization
c. Division of labor
d. Skill
2. Which of the following best characterizes the circular flow of income?
a. Household buy factors of production from business, and business buy goods and services from household
b. Business buy resources from the government, and household buy goods and services from business.
c. Businesses buy resources from households, and household use their income from the sale of resources to buy goods and services from businesses
d. The government purchases resources from businesses and households and then sells goods and services to businesses and households.
3. Philosophers draw a distinction between positive statements, which describe the world as it is, and _____________ which describe how the world should be.
a. Opportunity cost
b. Trade-off
c. Normative statement
d. Budget constraint

4. Scarcity implies that:
a. It is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available
b. Consumers are too poor to afford the goods and services available
c. At the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce.
d. Consumers would be willing to purchase the same quantity of a good at a higher price.
5. The opportunity cost of an action.
a. Can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action.
b. Can be determined by adding up the bills incurring as a result of the action
c. Can be objectively determined only by economist
d. Is a subjective valuation that can be determined only by the individual who chooses the action.
6.

What is the market for factors of production?

  1. What is the market for factors of production?

    1. The market for factors of production is where households and firms interact to trade factors of production for factor payments. For example this is where people provide firms with labor and firms pay them with wages. 

  2. What is the money market?

    1. The money market is where households, firms, and the government may save and/or invest their money to earn interests. Money market includes banks, stock market, bonds market, and other financial institutions where economic actors can buy and sell financial assets to earn interests and/or dividends.

  3. Who are the three economic actors in the circular flow model?

    1. In a circular flow model, the three main economic actors are the households, firms, and the government. Households include the typical individual consumers. Firms include businesses and similar producers in the economy. Finally, the government refers to the whole government system from federal to local level.

  4. How is the national income of an economy determined?

    1. The national income of an economy is determined by measuring the total value of the output produced in an economy or the total income earned by the actors in the economy. In a circular flow model, we can see that the value of total output produced should equal the total value of income generated and earned in the economy. This is because every dollar spent by someone in the economy is received by another person in the economy as income.

  5. What is GDP?

    1. The gross domestic product or GDP represents the sum total of the value of the final goods and services produced within the economy for a given year. It is the most commonly used measure of its economy’s productivity and income.

MC Qu. 020 In a market economy:

In a market economy:

the government owns the means of production so that it can produce what is in society's best interest.

businesses design their plans to maximize their profit and the market is relied upon to see that individual self-interest is consistent with society's interest.

workers are directed by government planning boards to produce what is in society's best interest.

government sets prices to make necessities affordable because it is in society's best interest to make necessities affordable.

MC Qu. 022 Suppose that at the current price consumers would ...

Suppose that at the current price consumers would like to purchase 10 million large-screen televisions and 15 million are available. When the market coordinates the demand and supply for large-screen televisions, the price of large-screen televisions will:

rise.

fall.

stay the same.

be fixed by the government.

MC Qu. 036 Most economies today are:

Most economies today are:

pure market economies.

differentiated primarily by the degree to which they depend on markets.

differentiated primarily by who owns the means of production.

socialist.

MC Qu. 047 Households are on the:

Households are on the:

the supply side of factor markets and the demand side of goods markets.

the demand side of factor markets and the supply side of goods markets.

the supply side of both factor markets and goods markets.

the demand side of both factor markets and goods markets.

MC Qu. 050 Governments do all of the following except:

Governments do all of the following except:

oversee the interaction of households and businesses in the goods and factor markets.

demand labor services from households in the factor market.

demand for goods and services from businesses in the goods market.

supply labor services to businesses in the factor market.

MC Qu. 054 Businesses fail because:

Businesses fail because:

they follow the principle of consumer sovereignty too closely.

the invisible hand determines that they are not producing something socially valuable.

they earn excessive profits.

entrepreneurship is present.

MC Qu. 066 A business is most likely to be characterized as a...

A business is most likely to be characterized as a corporation if:

it has two or more owners, with each owner liable for every other owner's actions.

it has only one owner.

it is legally treated as a person and owned by stockholders who are liable for the actions of the corporate "person" regardless of their investment

each owner is liable only to the extent of his or her own investment.

MC Qu. 074 Which of the following statements is correct?

Which of the following statements is correct?

Stockholders are legally liable for all the debt of a corporation.

A corporation is a business that is legally owned by its employees.

Corporations are legal entities that, in law, are treated as persons.

Most large companies and many small companies in the United States are not corporations.

MC Qu. 095 Government regulation of working conditions is an ...

Government regulation of working conditions is an example of:

government as a referee.

government as owner.

government as an actor.

government as a dictator.

10. MC Qu. 104 Which of the following would most likely generate ...

Which of the following would most likely generate a negative externality?

education

a lighthouse

cigarette smoke

employment