Term
| One of the major objectives of neoclassical economics is to... |
|
Definition
| explain the creation of wealth (i.e., gains from trade) and the allocation of resources via markets. |
|
|
Term
| What are the basic assumptions of neoclassical theory? |
|
Definition
economic man
the relationship between society and individuals, neoclassical theory sees society as the creation of individuals, rather than individuals as a creation of society
it presumes a society in which people’s economic relationships are structured as voluntary agreements based on the self-interest of the contracting parties.
People are insatiable, they make choices consistently, and they make choices based on their self interest. |
|
|
Term
Economic man is 1._______ and he acts in his own self-interest.
He has a pre-constituted human nature,
He always prefers more to less,
He can affect social outcomes, but is not affected by social outcomes. (This last assumption makes an assumption about the relationship between society and individuals, neoclassical theory sees society as the creation of individuals, rather than individuals as a creation of society).
That economic man is RATIONAL suggests…
People are insatiable, they make choices consistently, and they make choices based on their self interest. As Weir points out in regards to ‘alturistic’ actions, an individuals utility function can be part of another individuals function, thus, altruistic behavior can and does occur, because utility functions are not independent |
|
Definition
|
|
Term
| Economic man has a pre-constituted human nature _______. |
|
Definition
|
|
Term
| Economic man always prefers ___ to ___ |
|
Definition
|
|
Term
| He can affect ________, but is not affected by _________. |
|
Definition
|
|
Term
| The relationship between society and _________, neoclassical theory sees society as the creation of ______, rather than __________ as a creation of society). |
|
Definition
|
|
Term
| That economic man is RATIONAL suggests… |
|
Definition
| People are insatiable, they make choices consistently, and they make choices based on their self interest. |
|
|
Term
| As _____ points out in regards to ‘alturistic’ actions, an individuals utility function can be part of another individuals function, thus, altruistic behavior can and does occur, because utility functions are not _______. |
|
Definition
|
|
Term
| First and foremost, the neoclassical notion of ______ social welfare is achieved when individuals reach his or her highest possible point on their _______, based on the constraints faced. |
|
Definition
maximal
indifference curves |
|
|
Term
| markets increase consumer welfare by: |
|
Definition
| Making it possible for buyers and sellers to capture consumer and producer surplus, and to be better off than had they not engaged in voluntary exchange |
|
|
Term
| By making it possible for buyers and sellers to capture consumer and producer surplus, and to be better off than had they not engaged in voluntary exchange, markets.... |
|
Definition
| increase consumer welfare |
|
|
Term
| How are excess demands eliminated? |
|
Definition
| Through exchange, the individual will use the excess supplies to eliminate the excess demands. |
|
|
Term
| The consumers decide upon the composition and the level of _______. |
|
Definition
|
|
Term
| The producers decide on the level and the composition of P______ and I________ |
|
Definition
| Production and Investment |
|
|
Term
| Define consumer sovereignty: |
|
Definition
| The idea that it is the preferences of the consumer that should determine the output of the economy |
|
|
Term
| Concisely and carefully explain how gain or wealth is created, according to neoclassical theory. |
|
Definition
| that welfare is enhanced when consumers maximize their utility, within their budget constraints, and producers operate at P=MC. When this happens, equilibrium is achieved, and this is the point where the market is efficient. At any other point, when there is a surplus or shortage, pressure will be applied to prices to reach the market-clearing price |
|
|
Term
| How is "power" eliminated? |
|
Definition
| It is through these voluntary exchanges in a competitive marketplace where price in essence is naturally determined, and presumably, no one actor has power over another through the market mechanism. |
|
|
Term
| According to Wolff and Resnick, the private ability to choose rationally among commodities, as measured by this ratio of marginal utilities is equal to ______________, as measured by the ratio of prices. |
|
Definition
| the social ability to consume |
|
|
Term
| What does the law of diminishing marginal utility suggest? |
|
Definition
| that a consumer’s total utility stays the same even though the particular combination of goods (A and B) may change—as evidenced by movements along the indifference curves. |
|
|
Term
| The law of marginal utility can be stated mathematically as: |
|
Definition
|
|
Term
| We can calculate a consumer's maximum utility through: |
|
Definition
|
|
Term
based on the assumptions of neoclassical theory, indifference curves have three components:
1.
2.
3. |
|
Definition
Consumer’s internal desires
Consumer’s external constraints
Consumer’s ability to match internal desires with external constraints |
|
|
Term
| A consumer has a number of indifference curves, representing____________. |
|
Definition
| their preference for good A or B. |
|
|
Term
| Indifference curves depict the consumer’s ________, ability to choose _______, and the law of ________. |
|
Definition
| insatiability, consistently, diminishing marginal utility. |
|
|
Term
| The equation states that each B and A has a _____________, specific to that particular good & that consumer. |
|
Definition
|
|
Term
| Define the slope of the indifference curve. |
|
Definition
slope of the indifference curve is defined as : ΔB/ΔA = MUA/MUB
|
|
|
Term
| slope of the indifference curve is defined as : |
|
Definition
|
|
Term
The presumption here is that a consumer’s insatiability is constrained by external forces, namely: _________
_______________________________________. |
|
Definition
| the prices of goods and his/her income |
|
|
Term
| The marginal utility is limited by the __________________. |
|
Definition
|
|
Term
| His [the consumer's]expenditure and quantity of A and B, must match exactly his ______. |
|
Definition
|
|
Term
| State the budget equation. |
|
Definition
|
|
Term
| Note: review lesson 2- the section on the demand side. There is a lengthy explanation and it explains the equation. |
|
Definition
|
|
Term
In short, the supply curve of any commodity is a function of its _________
___________________. |
|
Definition
| input costs and the marginal productivities of those inputs. |
|
|
Term
input costs are derived from:
1.
2.
3. |
|
Definition
| individual preferences, ability to produce, and resource endowments. |
|
|
Term
| A firm is producing the optimal amount when _________. (Hint- this is the firm's goal) |
|
Definition
|
|
Term
| Marginal costs are defined as: |
|
Definition
|
|
Term
| In constructing the supply curve, we make the same set of assumptions about the firm as we do about consumers, except that... |
|
Definition
| ‘the firm” seeks to maximize profit rather than utility |
|
|
Term
| Profit: Is defined as ... |
|
Definition
| the net revenue after deducting production costs |
|
|
Term
| Profit is expressed as ... |
|
Definition
TT=TR-TC
TR= Total revenue
TC= total costs |
|
|
Term
| What is the profit equation? |
|
Definition
|
|
Term
| A firm is constrained by what? |
|
Definition
| by the price and the unit price of factor inputs |
|
|
Term
| The profit equation can be expressed as: |
|
Definition
|
|
Term
| The profit equation is influenced by... |
|
Definition
| changes in the quantity of A. |
|
|
Term
| The goal of firms is to produce a level of A that |
|
Definition
|
|
Term
| Profit maximization can be calculated as: |
|
Definition
|
|
Term
| on the readings from the packet as well as the on-line lectures, why are some economists critical of neoclassical theory? Why, for example, do they want to reclaim Adam Smith as someone whose theories are much broader than simply a justification for deregulation and pro-market policies? |
|
Definition
| Please read over question 6 in lesson two. Dr. Casey gives an explanation for this that cannot really be made into individual questions to memorize... |
|
|
Term
| Where will a firm locate? |
|
Definition
| Where it is rational to do so |
|
|
Term
| Where will household locate? |
|
Definition
| Where it is rational to do so. |
|
|
Term
| Firms will locate where they can __________, and households will locate where they can _____________. |
|
Definition
| maximize profit, maximize utility |
|
|
Term
| You want to make sure you are familiar with bid rent curves, and how we might calculate these for firms and households, and how based on the bid rent curves, the optimal allocation is achieved. |
|
Definition
|
|
Term
| Concerning government intervention in land use patterns, Liberal neoclassical views argue that ... |
|
Definition
| intervention in land markets is necessary to address market failures such as the locating of incompatible land uses next to each other, or to address equity issues such as local unemployment through economic development initiatives. |
|
|
Term
| Why do inefficiencies occur? |
|
Definition
| Because true costs are not realized |
|
|
Term
| Market Allocation Use of Land- How does intervention affect the ideal point of equilibrium? |
|
Definition
| Intervention moves action closer to or away from the ideal point of equilibrium. |
|
|
Term
| Market Allocation Use of Land-Review what Levy says about public choice theory |
|
Definition
|
|
Term
| Why does zoning have economic consequences? |
|
Definition
| changes the supply of land-> changes the price of land and the cost of housing and commercial buildings. |
|
|
