Econ 1

Front 1

economics

Back 1

a social science concerned with making optimal choices under conditions of scarcity.

economic wants exceed society's productive capacity

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macroeconomics

Back 2

the study of the entire economy or a major aggregate of the economy

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microeconomics

Back 3

the study of the individual consumer firm or market

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opportunity cost

Back 4

the amount of other products that must be forgone or sacrificed to produce a unit of a product

Hint 4

there is no free lunch

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law of increasing opportunity cost

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as the production of a particular good increases the opportunity cost of producing an additional unit rises

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productions possibility curve

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a curve that displays the different combinations of goods and services that society can produce in a fully employed economy, assuming a fixed availability of supplies of resources and fixed technology

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u.s economic system

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individual capitalism

mixed economy

Hint 7

private ownership of resources

and the use of markets and prices to coordinate and direct economic activity

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economic goal: full employment

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the use of all available resources to produce want-satisfying goods and services

Hint 8

the situation in which the unemployment rate is equal to the full employment rate of unemployment

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economic goal: economic growth

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an outward shift in the ppc that results from an increase in resource supplies or quality or an improvement in technology

Hint 9

an increase of real output (gdp) or real output per capita

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economic goal: price stability

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a steadiness of the price level from one period to the next; zero or low annual inflation

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characteristics of the market system: private property

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the right of a private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property

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characteristics of the market system: freedom of enterprise

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ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services and to sell them in their chosen markets

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characteristics of the market system: freedom of choice

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enables owners to employ or dispose of their property and money as they see fit, it allows workers to enter any line of work for which they are qualified, it ensures that consumers are free to buy goods and services that satisfy their wants and that their budgets allow

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characteristics of the market system: self-interest

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the motivating force of various economic units as they express their free choices

that which each firm, property owner, worker and consumer believes is best for itself and seeks to obtain

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characteristics of the market system: market and price

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an institution or mechanism that brings buyers (demanders) and sellers (suppliers)into contact

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five fundamental questions: what goods and services will be produced?

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goods and services that create profit

consumers are sovereign, they determine types and quantities of goods produced

consumers spend income on what they are most willing to buy dollar votes

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five fundamental questions: how will the goods be produced?

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minimize the cost per unit by using the most efficient resources

Hint 17

the available technology

the prices of needed resources

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five fundamental questions: who will get the output?

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consumers with the ability to and willingness to pay will get the product

ability to pay depends on income

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five fundamental questions: how will the system accommodate change?

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changes in consumer tastes, changes in technology, changes in resource prices

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five fundamental questions: how will the system progress?

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technological advancement

creative destruction

capital accumulation

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markets

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interaction between buyers and sellers

markets maybe local, national, or international

price is discovered in the interactions of buyers and sellers

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demand

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amount consumers are willing and be able to purchase at a given price

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law of demand

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other things equal, as price falls, the quantity demanded rises, and as prices rises the quantity demanded falls

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diminishing marginal utility

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successive units of a particular product yield less marginal utility

Hint 24

less satisfaction of each product consumed.

a second big mac

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income effect

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lower prices increasing purchasing power of a buyers income

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substitution effect

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lower price buyers have the incentive to substitute what is now less expensive product for other products that are now relatively more expensive

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demand curve

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its downward slope reflects the law of demand people buy more of a product, service, or resource as its price falls.

Hint 27

the relationship between price and quantity demanded is inverse

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determinants of demand:

tastes

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a favorable change in consumer tastes for a product-a change that makes the product more desirable mans that more of it will be demanded at each price

vice versa for unfavorable

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determinants of demand:

number of buyers

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an increase in the number of buyers in a market will increase demand; a decrease in buyers will decrease demand

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determinants of demand:

income

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a rise in income causes an increase in demand; a decline in income decreases it

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inferior goods

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goods whose demand varies inversely with money income

income goes down demand goes up income goes up demand goes down

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generic brands

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normal goods

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products whose demand varies directly with money income

Hint 32

name brands

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substitute good

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one that can be used in play of another good

Hint 33

Hagen daz and Ben&Jerry

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complementary good

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one that is used together with another good

Hint 34

computer and software

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consumer expectations

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a newly formed expectation of higher future prices may cause consumers to buy now in order to beat the anticipated price rises thus increasing demand

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supply

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a schedule or curve showing various amounts of a product that producers are willing and able to make available for sale

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law of supply

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there is a direct relationship between price and quantity supplied

Hint 37

as price rises, the quantity supplied rises; as price falls, the quantity supplied falls

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supply curve

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the upward slope of the curve reflects the law of supply producers offer more of a good, service or resource for sale as its price rises

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determinants of supply: resource prices

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rising price of resources will lower supply

Hint 39

increase price in sand and rock will increase the cost of producing concrete reducing its supply

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determinants of supply: technology

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improvements in technology enable firms to produce more with fewer resources increase supply

Hint 40

advancement in LCD monitors reduce there production cost increasing supply

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determinants of supply: taxes and subsidies

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increase in sales or property tax will increase production cost and lower supply

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determinants of supply: prices of other goods

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firms that produce soccer balls can sometimes use their plant to produce alternative goods like basketball the higher prices of these other goods may entice the produces to switch production which declines soccer ball supply

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determinants of supply: number of sellers

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as more firms enter the industry, the supply curve shifts right. conversely, the smaller the number of firms in the industry the less the market supply

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equilibrium

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where demand and supply curve intersect

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equilibrium price

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the price where the intentions of buyers and sellers match

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equilibrium quantity

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the quantity at which the intentions of buyers and sellers match

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surplus

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excess supply

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shortage

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excess demand

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rationing function of prices

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the ability of competitive forces of supply and demanded to establish a price at which selling and buying decisions are consistent

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efficient allocation

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productive efficiency: production of any particular good in a least costly way

allocate efficient of resources

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changes in demand:

increase in demand

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increases equilibrium price and quantity

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changes in demand:

decrease in demand

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decreases equilibrium price and quantity

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changes in supply:

increase in supply

Back 53

decreases equilibrium price, but increases quantity

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changes in supply:

decrease in supply

Back 54

increases equilibrium price, but decreases quantity