Chapter 1-4 Principles Of Microeconomics - Dirk Mateer, Lee Coppock

Front 1

Comparative Advantage

Back 1

Refers to the situation in which an individual, business, or country can produce at a lower opportunity cost than a competitor can

Front 2

Economics

Back 2

Is the study of how people allocate their limited resources to satisfy their nearly unlimited wants

Front 3

Economic Thinking

Back 3

Involves a purposeful evaluation of the available opportunities to make the best decision possible, systematically evaluating a course of action

Front 4

Incentives

Back 4

Factors that motivate you to act or to exert effort

Front 5

Macroeconomics

Back 5

Is the study of the overall aspects and workings of an economy, such as inflation, growth, employment, interest rates, and the productivity of the economy as a whole

Front 6

Markets

Back 6

Bring buyers and sellers together to exchange goods and services

Front 7

Marginal Thinking

Back 7

Requires decision-makers to evaluate whether the benefit of one more unit of something is greater than its cost.

Front 8

Microeconomics

Back 8

Is the study of the individual units that make up the economy

Front 9

Opportunity Cost

Back 9

Is the highest valued alternative that must be sacrificed in order to get something else

Front 10

Scarcity

Back 10

The term used to describe the limited nature of society's resources is scarcity

Front 11

Trade

Back 11

Is the voluntary exchange of goods and services between two or more parties

Front 12

What are the 5 foundations of Economics?

Back 12

Incentives, Trade-offs, Opportunity Cost, Marginal Thinking, and Trade

Front 13

Positive Incentive

Back 13

Are those that encourage action. For example, end of the year bonuses motivate employees to work hard through out the year, higher oil prices cause suppliers to extract more oil, and tax rebates encourage citizens to spend more money.

Front 14

Negative Incentive

Back 14

Also encourage action. For instance, the fear of receiving a speeding ticket keeps motorists from driving too fast, and the dread of a trip of the dentist motivates people to brush their teeth regularly.

Front 15

Direct Incentive

Back 15

For instance, in one gas station lowers its prices, it most likely will get business from customers who would not usually stop there.

Front 16

Indirect Incentive

Back 16

Lower gasoline prices also work as an indirect incentive, since lower prices might encourage consumers to use more gas

Front 17

Trade-offs

Back 17

Doing one thing often means that you will not have the time, resources, or energy to do something else.

Front 18

Absolute Advantage

Back 18

We say that Debra, has an absolute advantage, meaning that she has the ability to produce more with the same quantity of resources than mike can produce.

Front 19

Capital Goods

Back 19

Help in the production of other valuable goods and services in the future. Examples are, roads, trucks, factories, and computers

Front 20

Ceteris Paribus

Back 20

The process of examining a change in one variable while holding everything else constant

Front 21

Consumer Goods

Back 21

Any good that is produced for present consumption, such as, food, entertainment, and clothing

Front 22

Endogenous Factors

Back 22

Factors that we know about and can control. For example, the wind tunnel enabled the Wright Brothers to see how well each wing design performed

Front 23

Exogenous Factors

Back 23

Factors beyond our control-outside the model.

Front 24

Investment

Back 24

Is the process of using resources to create or buy new capital.

Front 25

Law of Increasing Relative Cost

Back 25

Which states that the opportunity cost of producing a good rises as a society produces more of it. Changes in relative cost mean that a society faces a significant trade-off of it tries to produce an extremely large amount of a single good.

Front 26

Normative Statement

Back 26

Cannot be tested or validated, For instance, the statement, " an unemployed worker should receive financial assistance to help make ends meet" is a matter of opinion.

Front 27

Positive Statement

Back 27

Can be tested and validate, "The unemployment rate is 7%" is a positive statement because it can be tested by gathering data.

Front 28

Production Possibilities Frontier

Back 28

Is a model that illustrates the combinations of outputs that a society can produce if all of its resources are being used efficiently.

Front 29

What makes a good economic model?

Back 29

A good model should be simple to understand, flexible in design, and able to make powerful predictions

Front 30

Competitive Market

Back 30

Is one in which there are so many buyers and sellers that each has only a small impact on the market price and output. In fact, the impact is so small it is negligible

Front 31

Complements

Back 31

Are two goods that are used together

Front 32

Demand Curve

Back 32

Is a graph of the relationship between the prices in the demand schedule and the quantity demanded at those prices

Front 33

Demand Schedule

Back 33

A table that shows the relationship between the price of the good and the quantity demand

Front 34

Equilibrium

Back 34

Where the demand curve and the supply curve intersect. At this point, the two opposing forces of supply and demand are perfectly balanced.

Front 35

Equilibrium Price

Back 35

The equilibrium price is also called the market-clearing price, since this is the only price at which no surplus or shortage of the good exists.

Front 36

Equilibrium Quantity

Back 36

Is the quantity amount at the equilibrium point

Front 37

Imperfect Market

Back 37

Is one in which either the buyer or the seller has an influence on the market price. Example, paying to see the view from the Empire State Building.

Front 38

Inferior Good

Back 38

Is purchased out of necessity rather than choice. Examples include, used cars compared to new ones, hamburger to filet mignon.

Front 39

Inputs

Back 39

Are resources used in the production process. Such as, workers, equipment, raw materials etc.

Front 40

Law of Demand

Back 40

States that, all other things being equal, the quantity demand falls when the price rises, and the quantity demand rises when the price falls

Front 41

Law of Supply

Back 41

States that, all other things being equal, the quantity supplied increases when the price rises, and the quantity supplied falls when the price falls.

Front 42

Law of Supply and Demand

Back 42

Market prices adjust to bring the quantity supplied and the quantity demanded into balance

Front 43

Market Demand

Back 43

Is the sum of all the individual quantities demanded by each buyer in a market at each price

Front 44

Market Economy

Back 44

Resources are allocated among households and firms with little or no government interference

Front 45

Market Supply

Back 45

Is the sum of the quantities supplied by each seller in the market at each price

Front 46

Monopoly

Back 46

Exists when a single company supplies the entire market for a particular good or service.

Front 47

Normal Good

Back 47

A consumer will buy more of a normal good as their income increases. An example is, meal at a restaurant.

Front 48

Quantity Demand

Back 48

The amount of a good or service purchased at the current price.

Front 49

Quantity Supplied

Back 49

Is the amount of a good or service that producers are willing and able to sell at the current price.

Front 50

Shortage

Back 50

Occurs whenever the quantity supplied is less than the quantity demanded

Front 51

Substitutes

Back 51

Are two goods that are used in place of each other. An examples is, Xbox and the Wii

Front 52

Supply Curve

Back 52

Is a a graph of the relationship between the prices in the supply schedule and the quantity supplied at those prices

Front 53

Supply Schedule

Back 53

Is a table that shows the relationship between the price of a good and the quantity supplied.

Front 54

Surplus

Back 54

Or excess supply, occurs whenever the quantity supplied is greater than the quantity demanded.

Front 55

What can create shifts in the demand curve?

Back 55

Changes in income, price of related goods, change in taste and preferences, expectations regarding the future price, and number of buyers

Front 56

What shifts a supply curve?

Back 56

The cost of inputs, changes in technology or the production process, taxes and subsidies, number of firms in the industry, and price expectations.

Front 57

Cross-Price elasticity of Demand

Back 57

(Ec) Measures the responsiveness of the quantity demanded of one good to a change in the price of a related good.

Has Formula

Front 58

Elasticity

Back 58

The responsiveness of buyers and sellers to changes in price or income

Front 59

Immediate Run

Back 59

No time for consumers to adjust their behavior. An example is, when the gas tank is empty, you have to stop at the nearest gas station and pay the posted price

Front 60

Income elasticity of demand

Back 60

Measures how a change in income affects spending.

Has Formula

Front 61

Long run

Back 61

Is a period of time when consumers have time to fully adjust to market conditions

Front 62

Price elasticity of demand

Back 62

Measures the responsiveness of quantity demanded to a change in price.

Front 63

Price elasticity of supply

Back 63

Is a measure of the responsiveness of the quantity supplied to a change in price

Front 64

Short run

Back 64

Is a period of time when consumers can partially adjust their behavior (and, in this case, can search for a good deal on gas.)

Front 65

Total Revenue

Back 65

Is the amount that consumers pay and sellers receive for a good.

Front 66

Determinants of the Price Elasticity of Demand

Back 66

The existence of substitutes, the share of the budget spent on the good, necessities versus luxury goods, and time and the adjustment process