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16 Cards in this Set
- Front
- Back
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Factors of Production
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Land, Labor, and Capital
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Product or Output markets
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Firms SUPPLY and Households DEMAND
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Input or Factor markets
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Firms buy inputs from households, which supply these inputs
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Consumer Sovereignty
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The idea that consumers ultimately dictate what will be produced by choosing what to produce
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Laissez Faire
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"Allow them to do" ; An economy in which individual people and firms pursue their own self-interests without any central direction or regulation
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Demand curves are derived while holding constant...
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Income, tastes, and the prices of other goods
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The Law of Demand
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As the price rises, quantity demanded decreases.
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Does the decrease in price affect demand?
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No! an increase in income is likely to cause an increase in the demand for most goods.
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What causes a shift in the demand curve?
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Change in the original conditions such as income, preferences, or prices of other goods and services
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What causes a movement along a demand curve?
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A change in price of a good or service
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Law of supply
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Increase in market price will lead to an increase in quantity supplied
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Change in supply is caused by...?
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Change in costs, input prices, technology, or prices of related goods and services
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According to the Classical Model, unemployment...
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could not persist because wages would fall to eliminate the excess supply of labor.
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Business cycle
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short-term ups and downs in the level of economic activity
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Fiscal policy
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the use of government spending and revenue collection to influence the economy
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The law of diminishing marginal utility
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helps to explain why demand curves are very likely to slope downward
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