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36 Cards in this Set
- Front
- Back
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Model |
Any simplified representation of reality that is used to better understand real-life situations |
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Other Things Equal Assumption |
All other relevant factors remain unchanged |
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Production Possibility Frontier |
A model that helps economists think about the trade-offs every economy faces |
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Comparative Advantage |
A model that clarifies the principle of gains from trade both between individuals and between countries |
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Circular-flow Diagram |
One direction: flows of physical things such as goods, services, labor, or raw materials Other direction: Flows of money that pay for this physical things |
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Factors of Production |
The resources used to produce goods or services |
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Technology |
The technical means for producing goods and services |
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Comparative Advantage |
Producing a good or service if its opportunity cost of producing the good or service is lower than other countries |
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T/F: Everyone has a comparative advantage in something and everyone has a comparative disadvantage in something |
True |
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Absolute Advantage |
If the country can produce more output person worker than other countries |
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T/F: Having an absolute advantage is the same thing as having a comparative advantage |
False |
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Barter |
One party directly trades a good or service for another good or service without using money |
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Household |
Consists of either an individual or a group of people that share their income |
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Firm |
An organization that produces goods and services for sale |
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Markets for Goods and Services |
Households buy the goods and services they want from firms |
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Factor Markets |
Firms buy the resources they need to produce goods and services |
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Income Distribution |
The way in which total income is divided among the owners of the various factors of production |
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Positive Economics |
Analysis that tries to answer questions about the way the world works, which have definite right or wrong answers. About description What most economists use |
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Normative Economics |
Analysis that involves saying how the world should work About prescription |
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Forecast |
Simple prediction about next year's revenue |
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Variable |
The quantity that can take on more than one value |
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Origin |
The point where the axes of two-variable graph meet |
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Casual Relationship |
A relationship in which the value taken by one variable directly influences or determines the value taken by the other variable |
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Independent Variable |
The determining variable in a causal relationship |
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Dependent Variable |
The variable the independent variable determines |
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Curve |
A line on a graph that depicts a relationship between two variables, it may either be a straight line or curved line |
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Linear Relationship |
If the curve is a straight line |
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Nonlinear Relationship |
If the curve is not a straight line |
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Positive Relationship |
When an increase in one variable is associated with an increase in the other variable |
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Negative Relationship |
When an increase in one variable is associated with a decrease in the other variable |
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Slope |
The measure of how steep the curve is and indicated how sensitive the y-variable is to a change in the x-variable |
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Slope Equation |
Change in y ----------------- Change in x |
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Nonlinear Curve |
One in which the slope changes as you move along it |
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Tangent Line |
A straight line that just touches, or is tangent to, a nonlinear curve at a particular point The slope of this line is equal to the slope of the nonlinear curve at that point |
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Maximum Point |
The highest point along the nonlinear curve Slope changes from positive to negative |
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Minimum Point |
The lowest point along the nonlinear curve Slope changes from negative to positive |
