50 Cards in this Set
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scarcity
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the limited nature of society's rescources
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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 the most it can from its scarce resources
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equality
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the property of disturbing economic prosperity uniformly among the members of society
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opportunity cost
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whatever must be given to obtain some item
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rational people
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people who systematically and purposefully do the best they can to achieve their objectives
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marginal change
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a small incremental adjustment to a plan of action
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incentive
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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 economy
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an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
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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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fluctuations 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 combination of output that the economy can possibly produce given the available factors of production and the available 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 economywide phenomena, including inflation, unemployment, and economic growth
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positive statements
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claims that attempt to describe the world as it is
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normative statements
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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 that another producer
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opportunity cost
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whatever must be given up to obtain some item
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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 purchace
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law of demand
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the claim that, other things equal, the quantity demanded of a food falls when the price of the 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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compliments
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two goods for which an increase in the price of one leads to a 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 demand
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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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elasticity
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a measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants
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price elasticity of demand
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a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price
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total revenue
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the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold
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EC 210: TEST 1