ECON 203: EXAM 1
54 Cards in this Set
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Scarcity
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The limited nature of society's resources
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economics
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the study of how society manages its scarce resources
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efficiency
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the property of society getting te most it can from its scarce resources
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Equality
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the property of distributing economic properity uniformly among the members of society
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Opportunity Cost
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whatever must be given up to obtain some item
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rational people
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people who systematically and purposfully do the best they can to achieve their objectives
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marginal changes
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small incremental adjustments to a plan
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incentives
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something that induces a person to act
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property rights
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the ability of an individual to own and exercise control over scarce resources
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market failure
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a situation in which a market left on its own fails to allocate resources efficiently
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externality
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the impact of one person's actions on the well-being of a bystander
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Market Power
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the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
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productivity
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the quantity of goods and services produced from each unit of labor input
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inflation
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an increase in the overall level of prices in the economy
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business cycle
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flunctuations in economic activity, such as employment and production
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Circular-Flow diagram
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a visual model of the economy that shows how dollars flow through markets among households and firms
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production possibilities frontier
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a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the availiable production technology
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Microeconomics
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the study of how households and firms make decisions and how they interact in markets
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Macroeconomics
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the study of economy-wide, phenonmena, including inflation, unemployment, and economics growth
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Positive statement
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claims that attempt to describe the world as it is
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Normative Statement
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Claims that attempt to prescribe how the world should be
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Absolute Advantage
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the ability to produce a good using fewer inputs than another producer
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Opportunity Cost
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whatever must be given up to obtain something else
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Comparative Advantage
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the ability to produce a good at a lower opportunity cost than another producer
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Imports
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goods produced abroad and sold domestically
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Exports
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Goods produced domestically and sold abroad
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market
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a group of buyers and sellers of a particular good or service
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Competitive market
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a market in which there are many buyers and many sellers so that each has a negligible impact on the market price
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Quantity Demanded
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the amount of a good that buyers are willing and able to purchase
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law of demand
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the claim that, other things equal, the quantity demanded of a good falls when the price of a good rises
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demand schedule
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a table that shows the relationship between the price of a good and the quantity demanded
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demand curve
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a graph of the relationship between the price of a good and the quantity demanded
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normal good
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a good for which, other things equal, an increase in income leads to an increase in demand
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inferior good
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a good for which, other things equal, an increase in income leads to a decrease in demand
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substitutes
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two goods for which an increase in the price of one leads to an increase in the demand for the other
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Complements
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two goods for which an increase in the price of one leads to the decrease in the demand for the other
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Quantity Supplied
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the amount of a good that sellers are willing and able to sell
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Law of supply
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the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
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supply schedule
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a table that shows the relationship between the price of a good and the quantity supplied
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Supply Curve
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a graph of the relationship between the price of a good and the quantity supplied
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equilibrium
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a situation in which the market price has reached the level at which quantity supplied equals quantity demanded
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Equilibrium Price
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the price that balances quantity supplied and quantity demanded
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Equilibrium Quantity
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the quantity supplied and the quantity demanded at the equilibrium price
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Surplus
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a situation in which quantity supplied is greater than quantity demanded
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Shortage
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a situation in which quantity demanded is greater than quantity supplied
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Law of Supply and Demanded
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the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance.
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Gross Domestic Product
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the market value of all final goods and services produced within a country in a given period of time
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Consumption
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spending by households on goods and services, with the exception of purchases of new housing
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Investment
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spending on capital equipment, inventories, and structures, including household purchases of new housing
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government purchases
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spending on goods and services by local, state, and federal governments
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Net Exports
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spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)
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Nominal GDP
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the production of goods and services valued at current prices
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Real GDP
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the production of goods and services valued at constant prices
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GDP Deflator
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a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100
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Final Study Guide: Econ 203