ECO 304K: Final Exam Terms
74 Cards in this Set
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investment
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creation of capital: the process of using resources to produce new capital
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marginal rate of substitution
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In economics, the marginal rate of substitution is the rate at which a consumer is ready to give up one good in exchange for another good while maintaining the same level of satisfaction.
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rate of return
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the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested.
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budget constraint
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A Budget constraint represents the combinations of goods and services that a consumer can purchase given current prices with his or her income.
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equilibrium
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In economics, economic equilibrium is simply a state of the world where economic forces are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change.
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excess demand
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In economics, Excess demand is when quantity demanded is more than quantity supplied.
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economic shortage
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Economic shortage is a term describing a disparity between the amount demanded for a product or service and the amount supplied in a market.
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monopolies
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exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it.
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long run
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In economic models, the long-run time frame assumes no fixed factors of production.
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short run
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In economics, the concept of the short-run refers to the decision-making time frame of a firm in which at least one factor of production is fixed.
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interest rates
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An interest rate is the price a borrower pays for the use of money they borrow from another burrowee, for instance a small company might borrow capital from a bank to buy new assets for their business, and the return a lender receives for deferring the use of funds, by lending it to the b…
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present value
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Present value is the value on a given date of a future payment or series of future payments, discounted to reflect the time value of money and other factors such as investment risk.
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firm
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A business (also called a company, enterprise or firm) is a legally recognized organization designed to provide goods and/or services to consumers.
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Total Fixed Cost
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In economics, fixed costs are business expenses that are not dependent on the activities of the business They tend to be time-related, such as salaries or rents being paid per month.
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equilibrium
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In economics, economic equilibrium is simply a state of the world where economic forces are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change.
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monopolistic competition
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Monopolistic competition is a common market structure where many competing producers sell products that are differentiated from one another (that is, the products are substitutes, but are not exactly alike, similar to brand loyalty).
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differentiation
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In marketing, product differentiation (also known simply as "differentiation") is the process of distinguishing a product or offering from others, to make it more attractive to a particular target market.
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industry
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An industry trade group, also known as a trade association, is an organization founded and funded by businesses that operate in a specific industry.
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price elasticity of demand
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Price elasticity of demand (PED) is defined as the responsiveness of the quantity demanded of a good or service to a change in its price.
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midpoint formula
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The midpoint (also known as class mark in relation to histogram) is the middle point of a line segment.
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total revenue
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Total revenue is the total money received from the sale of any given quantity of output.
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economic profit
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In neoclassical economics, economic profit is the difference between a firm's total revenue and its opportunity costs.
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fixed cost
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In economics, fixed costs are business expenses that are not dependent on the activities of the business They tend to be time-related, such as salaries or rents being paid per month.
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average fixed cost
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Average fixed cost (AFC) is an economics term used to describe the total fixed costs (TFC) divided by the quantity (Q) of units produced.
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average total cost
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In economics, average cost is equal to total cost divided by the number of goods produced (the output quantity, Q).
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average variable cost
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Average variable cost (AVC) is an economics term to describe a firm's variable costs (labor, electricity, etc.) divided by the quantity (Q) of total units of output.
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barriers to entry
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In economics and mostly especially in the theory of competition, barriers to entry are obstacles in the path of a firm that make it difficult to enter a given market.
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behavioral economics
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A branch of economics that uses the insights of psychology and economics to investigate decision making
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bond
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A contract between a borrower and a lender, in which the borrower agrees to pay the loan at some time in the future, along with interest payments along the way
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capital
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In economics, capital or capital goods or real capital are factors of production used to create goods or services that are not themselves significantly consumed (though they may depreciate) in the production process.
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capital income
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income earned on savings that have been put to use through financial capital markets
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capital market
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A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds.
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command economy
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an economy in which a central government either directly or indirectly sets output targets, incomes, and prices
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comparative advantage
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In economics, the law of comparative advantage refers to the ability of a party (an individual, a firm, or a country) to produce a particular good or service at a lower opportunity cost than another party.
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consumer goods
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In economics final goods are goods that are ultimately consumed rather than used in the production of another good.
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deadweight loss
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In economics, a deadweight loss (also known as excess burden or allocative inefficiency) is a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal.
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variable costs
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Variable costs are expenses that change in proportion to the activity of a business.
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accounting profit
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Accounting profit is the difference between price and the costs of bringing to market whatever it is that is accounted as an enterprise (whether by harvest, extraction, manufacture, or purchase) in terms of the component costs of delivered goods and/or services and any operating or other …
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utility maximizing rule
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equating the ratio of the marginal utility of a good to its price for all goods
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public goods
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In economics, a public good is a good that is non-rivalrous and non-excludable.
no one can be excluded from enjoying their benefits ex. national defense
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pure monopoly
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an industry with a single firm that produces a product for which there are no close substitutes and in which significant barriers to entry prevent other firms from entering the industry to compete for profits
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monopolistic competition
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Monopolistic competition is a common market structure where many competing producers sell products that are differentiated from one another (that is, the products are substitutes, but are not exactly alike, similar to brand loyalty).
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elastic
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In economics, elasticity is the ratio of the percent change in one variable to the percent change in another variable.
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elastic demand
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a demand relationship in which the percentage change in quantity demanded is larger than the percentage change in price in absolute value
(a demand elasticity with an absolute value greater than 1)
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homogeneous products
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A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market.
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revenue
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In business, revenue or revenues is income that a company receives from its normal business activities, usually from the sale of goods and services to customers.
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market supply
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the sum of all that is supplied each period by all producers of a single product
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market demand
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the sum of all quantities of a good or service demanded per period by all the households buying in the market for that good or service
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diminishing returns
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n economics, diminishing returns (also called diminishing marginal returns) refers to how the marginal production of a factor of production starts to progressively decrease as the factor is increased, in contrast to the increase that would otherwise be normally expected.
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demand curve
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In economics, the demand curve is the graph depicting the relationship between the price of a certain commodity, and the amount of it that consumers are willing and able to purchase at that given price.
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present value
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Present value is the value on a given date of a future payment or series of future payments, discounted to reflect the time value of money and other factors such as investment risk.
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opportunity cost
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Opportunity cost is the value of the next-best choice available to someone who has picked between several mutually exclusive choices.
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negative externality
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In economics, an externality or spillover of an economic transaction is an impact on a party that is not directly involved in the transaction.
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marginal cost
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In economics and finance, marginal cost is the change in total cost that arises when the quantity produced changes by one unit.
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producer surplus
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the different between the current market price and and teh full cost of production for the firm
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dominant strategy
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In game theory, dominance (also called strategic dominance) occurs when one strategy is better than another strategy for one player, no matter how that player's opponents may play.
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oligopoly
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An oligopoly ((from Ancient Greek - (oligoi) "few" + - (polein) "to sell") is a market form in which a market or industry is dominated by a small number of sellers (oligopolists).
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excess supply or surplus
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the condition that exists when quantity demanded exceeds quantity supplied at the current price
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exchange rate
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In finance, the exchange rates between two currencies specifies how much one currency is worth in terms of the other.
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microeconomics
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Microeconomics (from prefix "micr(o)-" meaning "small" + "economics") is a branch of economics that studies how households and firms make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold.
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marginal product
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In economics, the marginal product or marginal physical product is the extra output produced by one more unit of an input (for instance, the difference in output when a firm's labour is increased from five to six units).
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marginal utility
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In economics, the marginal utility of a good or of a service is the utility of the specific use to which an agent would put a given increase in that good or service, or of the specific use that would be abandoned in response to a given decrease.
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moral hazard
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Moral hazard is the fact that a party insulated from risk may behave differently from the way it would behave if it would be fully exposed to the risk.
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price ceiling
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A price ceiling is a government-imposed limit on how high a price can be charged on a product.
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price floor
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A price floor is a government- or group-imposed limit on how low a price can be charged for a product.
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scarce
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limited
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shift of supply curve
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the change that takes place in a demand curve corresponding to a new relationship between quantity supplied of a good and the price of that good. The shift is brought about by a change in the original conditions
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shift of demand curve
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the change that takes place in a demand curve corresponding to a new relationship between quantity demanded of a good and price of that good. the shift is brought about by a change in the original conditions
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sunk costs
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past costs that have already been incurred and cannot be recovered.
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total utility
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the total amount of satisfaction obtained from the consumption of a good or service
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total variable cost
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the total of all costs that vary with output in the short run
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utility possibilities frontier
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a graphic representation of a two person world that shows all points at which I's utility can be increased only if J's utility is decreased
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utility
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a measure of the relative satisfaction from, or desirability of, consumption of various goods and services.
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deadweight loss
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a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal.
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ECO 304K: Final Exam Terms