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30 Cards in this Set
- Front
- Back
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Scarcity
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The condition in which human wants are forever greater than the available supply of time, goods, and resources.
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Resources
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The basic categories of inputs used to produce goods and services. Also called factors of production. Divided into 3 categories: land, labor, and capital.
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Economics
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The study of how society chooses to allocate its scarce resources to the production of goods and services in order to satisfy unlimited wants.
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Macroeconomics
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The branch of economics that studies decision making for the economy as a whole. Variables include: inflation, unemployment, growth of the economy, the money supply, and the national incomes of developing countries.
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Microeconomics
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The branch of economics that studies decision making by a single individual, household, firm, industry, or level of gov't.
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Ceteris Paribus
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Latin phrase that means while certain variables change, "all other things remain unchanged." Allows us to isolate/focus attention on selected variables.
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Association vs. Causation
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A model is valid only when a cause-and-effect relationship is stable over time, rather than being an association that occurs by chance and eventually disappears.
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Positive economics
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Deals w/the facts and addresses, "what is" or "verifiable" questions. An analysis limited to statements that are verifiable. Can be proven either true or false. "If A, then B..."
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Normative economics
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Attempts to determine, "what should be." Analysis based on value judgements. Express an indiv. or collective opinion on a subject and con't be proven by facts to be true or false. Words: good, bad, should, and ought to.
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Opportunity costs
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The best alternative sacrificed for a chosen alternative. It's the cost of not choosing the next best alternative.
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Marginal analysis
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Examines the effects of additions to or subtractions from a current situation
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Production possibilities curve
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Shows the maximum combinations of 2 outputs that an economy can produce in a given period of time with its available resources and technology.
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Law of Increasing Opportunity Costs
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The opportunity cost increases as production of one output expands, causing the curve to have a bowled out shape.
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Economic growth
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The ability of an economy to produce greater levels of output, represented by an outward shift of its production possibilites curve.
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Law of Demand
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There is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus.
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Nonprice determinants/demand shifters
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1. number of buyers
2. tastes and preferences 3. income 4. expectations of future changes in prices, income, and availability of goods 5. prices of related goods |
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Normal good
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Any good for which there is a direct relationship between changes in income and its demand curve.
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Inferior good
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Any good for which there is an inverse relationship between changes in income and its demand curve.
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Nonprice determinants of supply
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1. number of sellers
2. technology 3. resource prices 4. taxes and subsidies 5. expectations of producers 6. prices of other goods the firm could produce |
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Surplus
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A market condition existing at any price at which the quantity supplied is greater than the quantity demanded.
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Shortage
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A market condition existing at any price at which the quantity supplied is less than the quantity demanded.
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Equilibrium
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Any price and quantity where the quantity demanded and the quantity supplied are equal.
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Price ceiling
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A legally established maximum price a seller can charge
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Price floor
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A legally established minimum price a seller can be paid
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Market failure
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When market equilibrium results in too few or too many resources being used in the production of a good or service.
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Externalities
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A cost or benefit imposed on people other than the consumers and produces of a good or service.
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Elastic demand
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Condition in which the percentage change in quantity demanded is greater than the percentage change in price. Elasticity coeffictient is greater than 1.
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Inelastic demand
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The percentage change in quantity demanded is less than the percentage change in price.
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Perfectly elastic demand
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A small percentage change in price brings about an infinite percentage change in quantity demanded.
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Perfectly inelastic demand
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The quantity demanded does not change as the price changes.
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