Chapter 1-4

Front 1

incentive

Back 1

a reward that encourages an action or a penalty that discourages one

Front 2

economics

Back 2

the social science that studies the choices individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives tat influence and reconcile those choices.

Front 3

microeconomics

Back 3

the study of choices that individuals and businesses make, the way these decisions interact in markets, and the influence of government

Front 4

macroeconomics

Back 4

the study of performance of the national and global economies.

Front 5

factors of production

Back 5

Land-natural resources.

Labor-the work time/effort people devote to producing the god or service

Capital- the tools, instruments, machines, buildings, and other constructions that businesses use to produce goods/services.

Entrepreneurship- the human resource that organizes labor, land, and capital

Front 6

tradeoff

Back 6

an exchange- giving up one thing to get something else.

Front 7

opportunity cost

Back 7

is the highest valued alternative that must be given up to get it

Front 8

margin

Back 8

the next unit

Front 9

allocative efficiency

Back 9

when goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit.

Front 10

marginal cost

Back 10

is the opportunity cost of producing one more unit of the good

Front 11

comparative advantage

Back 11

a person has a comparative advantage in an activity if that person can perform the activity at a lower opportunity cost than anyone else.

Front 12

absolute advantage

Back 12

a person who is more productive than others has an absolute advantage.

Front 13

Market

Back 13

any arrangement that enables buyers and sellers to get information and to do business with each other.

Front 14

competitive markets

Back 14

a market that has many buyers and sellers so no single buyer or seller can influence the price.

Front 15

money price

Back 15

the number of dollars that must be given up in exchange for it. (regular every day price as you think of it)

Front 16

relative price

Back 16

the ratio of one price to another

Front 17

quantity demanded

Back 17

the quantity demanded of a good/service is the amount that consumers plan to buy during a given time period at a particular price.

Front 18

law of demand

Back 18

other things remaining the same, the higher the price of the good, the smaller the quantity demanded; an the lower the price of the good, the greater the quantity demanded.

higher price reduces quantity demanded because of the income effect and the substitution effect.

Front 19

demand

Back 19

refers to the entire relationship between the price of a good and the quantity demanded of that good.

Front 20

what factors cause a change in demand? (shifts)

Back 20

1. price of substitute

2. price of a complement

3. expected future prices

4. income

5. population/ # of buyers

6. preference

7. quality

8. advertisements

Front 21

movement along the demand curve

Back 21

if the price of the good changes but no other influence on buying plans change

Front 22

quantity supplied

Back 22

the quantity supplied of a good or service is the amount that producers plan to sell during a given time period at a particular price

Front 23

law of supply

Back 23

other things remaining the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of good, the smaller the quantity supplied.

Front 24

supply

Back 24

refers to the entire relationship between the price of a good and the quantity supplied of it.

Front 25

factors that change supply

Back 25

1. the prices of factors of production

2. the prices of related goods produced

3. expected future prices

4. the number of suppliers

5. technology

6. the state of nature

Front 26

change in quantity supplied

Back 26

a movement along the curve

Front 27

equilibrium price

Back 27

is the price at which the quantity demanded equals the quantity supplied

Front 28

equilibrium quantity

Back 28

the quantity bought and sold at the equilibrium price

Front 29

the price elasticity of demand

Back 29

is a units free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences n buying plans remain the same

Front 30

perfectly inelastic demand

Back 30

if the quantity demanded remains constant when the price changes, then the price elasticity of demand is zero and the good is said to be perfectly inelastic. (ie. prescription medication, addictive substances)

Front 31

unit elastic demand

Back 31

if the percent change in the quantity demanded equals the percentage change in the price, then the price elasticity is 1 and the good is said to have unit elastic demand.

Front 32

inelastic demand

Back 32

the price elasticity is between 0 and 1. (food and shelter)

Front 33

perfectly elastic demand

Back 33

if the quantity demanded changes by an infinitely large percentage in response to a tiny price change, then the price elasticity of demand is infinity and the good is said to have a perfectly elastic demand

Front 34

elastic demand

Back 34

the general case in which the percentage change in the quanitity demanded exceeds the percentage change in price. greater than 1. (automobiles and furniture)

Front 35

elasticity of supply

Back 35

measures the responsiveness of the quantity supplied to a change in the price ofa good when all other influences on selling plans remain the same

elasticity of supply= %change in quantity supplied/ %change in price

Front 36

factors that influence the elasticity of supply

Back 36

1. resource substitution possibilities

2. time frame for the supply decision