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30 Cards in this Set

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  • Back
Scarcity
The condition in which human wants are forever greater than the available supply of time, goods, and resources.
Resources
The basic categories of inputs used to produce goods and services. Also called factors of production. Divided into 3 categories: land, labor, and capital.
Economics
The study of how society chooses to allocate its scarce resources to the production of goods and services in order to satisfy unlimited wants.
Macroeconomics
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.
Microeconomics
The branch of economics that studies decision making by a single individual, household, firm, industry, or level of gov't.
Ceteris Paribus
Latin phrase that means while certain variables change, "all other things remain unchanged." Allows us to isolate/focus attention on selected variables.
Association vs. Causation
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.
Positive economics
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..."
Normative economics
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.
Opportunity costs
The best alternative sacrificed for a chosen alternative. It's the cost of not choosing the next best alternative.
Marginal analysis
Examines the effects of additions to or subtractions from a current situation
Production possibilities curve
Shows the maximum combinations of 2 outputs that an economy can produce in a given period of time with its available resources and technology.
Law of Increasing Opportunity Costs
The opportunity cost increases as production of one output expands, causing the curve to have a bowled out shape.
Economic growth
The ability of an economy to produce greater levels of output, represented by an outward shift of its production possibilites curve.
Law of Demand
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.
Nonprice determinants/demand shifters
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
Normal good
Any good for which there is a direct relationship between changes in income and its demand curve.
Inferior good
Any good for which there is an inverse relationship between changes in income and its demand curve.
Nonprice determinants of supply
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
Surplus
A market condition existing at any price at which the quantity supplied is greater than the quantity demanded.
Shortage
A market condition existing at any price at which the quantity supplied is less than the quantity demanded.
Equilibrium
Any price and quantity where the quantity demanded and the quantity supplied are equal.
Price ceiling
A legally established maximum price a seller can charge
Price floor
A legally established minimum price a seller can be paid
Market failure
When market equilibrium results in too few or too many resources being used in the production of a good or service.
Externalities
A cost or benefit imposed on people other than the consumers and produces of a good or service.
Elastic demand
Condition in which the percentage change in quantity demanded is greater than the percentage change in price. Elasticity coeffictient is greater than 1.
Inelastic demand
The percentage change in quantity demanded is less than the percentage change in price.
Perfectly elastic demand
A small percentage change in price brings about an infinite percentage change in quantity demanded.
Perfectly inelastic demand
The quantity demanded does not change as the price changes.