Econ 1000 EXAM 1 KSU (part 2)
nominal price
the absolute price of a good in dollar terms
nominal v. real prices
nominal: the "price tag"
real: adjusted for inflation
nominal --> real
CPI present / CPI past = multiplier
nominal price x multiplier
exchange rate
shows how much certain goods cost in different country
when you borrow $$ the lendor is worse off
-opportunity cost foregoing consumption
-uncertainty in world
tarrifs
harmful to economy
fixed pie fallacy
find new work elsewhere
Elasticity
sensitivity to price changes
gas
less elastic; not sensitive to price
ice-cream
more elastic; sensitive to price
the more vertical the demand curve
The more inelastic a good is.
having more substitutes:
increases elasticity
economically free
u.s.
canada
europe
chile
economic freedom
Allows individuals to make economic decisions that they believe are in their own best interest
Why is trade a good thing?
trade allows a country to have access to a wider range of goods and services.
this increases peoples' choices and their standard of living
trade
increases wealth with comparative advantage
(both societies produce more output)
trade increasing returns--
specialize and produce more output
ex. henry ford assembly line
production possibilities frontier
a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology