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73 Cards in this Set
- Front
- Back
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individual choice |
the decision by an individual of what to fo, which necessarily involves a decision of what not to do |
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resource |
anything that can be used to produce something else |
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scare |
not enough of the recourses are available to satisfy all the various ways a society wants to use them |
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opportunity cost |
what you must give up in order to get an item, real cost of an item |
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marginal decision |
decisions about whether to do a bit more or a bit less of an activity |
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incentive |
anything that offers rewards to people who change their behavior |
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interaction |
my choices affect your choices and vice versa; a feature of most economic situations. the results of this _ are often quite different from what the individuals intended |
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trade |
provide goods and services to others and receive goods and services in return |
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gains from trade |
people can get more of what they want through trade than they could if they tried to be self-sufficient |
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specialization |
each person specializes in the task that he or she is good at performing |
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equilibrium |
when no individual would be better off doing something different |
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efficent |
an economy is this if it takes all opportunities to make some people better off without making other people worse off |
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equity |
everyone gets his or her fair share; since people can disagree about what's "fair," this isnt as well defined a concept as efficiency |
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model |
a simplified representation of a real situation that is used to better understand real-life situations |
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other things equal assumption |
the assumption that all other relevant factors remain unchanges |
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production possibility frontier |
illustrates the trade-offs facing an economy that produces only two goods; it hoes the maximum quantity of one good that can be produced for any given quantity produced of the other |
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factors of production |
resources used to produce goods and services |
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technology |
the technical menas for producing goods and service |
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comparative advantage |
a country has this in producing a good or service if its opportunity cost of producing the good or service is lower than other countries'; likewise, an individual has a comparative advantage in producing a good or service is is or her opportunity cost of producing the good or service is lower than for other people |
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absolute advantage |
if the country can produce more output per worker than other countries; likewise, an individual if he or she is better at producing it than other people; hving this is not the same things as having a comparative one |
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barter |
when people directly exchange goods or services that they have for goods and services that they want |
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circular-flow diagram |
represents the transactions in an economy by flows around a circle |
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markets for goods and services |
firms sell goods and services that they produce to households |
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factor markets |
firms buy resources they need to produce goods and services in __ |
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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 |
the branch og economic analysis that describes the way the economy actually works |
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forecast |
a simple prediction of the future |
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competitive market |
a market in which there are many buyers and sellers of the same good or servie, none of whom can influence the price at which the good or service is sold |
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supply and demand model |
a model of how a competitive market behaves |
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demand schedule |
shows how much of a good or service consumers will want to buy at different prices |
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quantity demanded |
the actual amount of a good or service consumers are willing to buy at some specific price
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demand curve |
a graphical representation of the demand schedule; shows the relationship between quantity demanded and price |
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law of demand |
a higher price for a good or service, other things equal, leads people to demand a smaller quantity of that good or service |
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shift of the deman curve |
a change in the quantity demanded at any given price, represented by the change of the original demand curve to a new position, denoted by a new demand curve |
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movement along the demand curve |
a change in the quantity demanded of a good arising from a change in the good's price |
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substitutes |
two goods are __ if a rise in the price of one of the goods leads to an increase in the demand for the other good |
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comlpements |
two goods are __ if a rise in the price of one good leads to a decrease in the demand for the other good |
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normal good |
when a rise in income increases the demand for a good, it is a __ |
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inferior good |
when a rise in income decreases the demand for a good, it is an __ |
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individual deman curve |
illustrates the relationship between quantity demanded and price for an individual consumer |
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quantity supplied |
the actual amount of a good or service people are willing to sell at some specific price |
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supply schedule |
shows how much of a good or service would be supplied at different prices |
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supply curve |
shows the relationship between quantity supplied and price |
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shift of the supply curve |
a change in the wuantity supplied of a good or service at any given price; is represented by the change of the original supply curve to a new position, denoted by a new supply curve |
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movement along the supply curve |
a change in the quantity supplied of a good arising from a change in the good's price |
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input |
a good or service that is used to produce another good or service |
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individual supply curve |
illustrates the relationship between quantity supplies and price for an individual producer |
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equilibrium price |
the price at which price has moved to a level at which the quantity of a good or service demanded equals the quantity of that good or service supplied; aka market-clearing price |
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surplus |
__ of a good or service when the quantity supplied exceeds the quantity demanded; occur when the price is above its equilibrium level |
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shortage |
__ of a good or service when the quantity demanded exceeds the quantity supplied; occur when the price is below equilibrium level |
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willingness to pay |
the maximum price at which he or she would buy that good |
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individual consumer surplus |
the net gain to an individual buyer from the purchase of a good; equal to the difference between the buyer's willingness to pay and the price paid |
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total consumer surplus |
the sum of the individual consumer surpluses of all the buyers of a good in a market |
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individual producer surplus |
the net gain to an individual seller from selling a good; equal to the difference between the price recieved and the seller's cost |
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total producer surplus |
the sum of the individual surpluses of all he sellers of a good in a merket |
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total surplus |
the total net gain to consumers and producers from trading in the market; the sum of the producer and the consumer surplus |
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property rights |
the rights of owners of valuable items, whether resources or goods, to dispose of thoe items as they choose |
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economic signal |
any piece of information that ehlps people make better economic decisions |
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inefficient |
a market or economy is __ if there are misuesed opportunities: some people couls be made better off without making other people worse off |
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market failure |
occurs when a market fails to be efficient |
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price controls |
legal restrictions on how high or low a market price may go |
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price ceiling |
a maximum price sellers are allowed to charge for a good or service |
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price floor |
a minimum price buyers are required to pay for a good or service |
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deadweight loss |
the loss in total surplus that occurs whenever an action or policy reduces the quantity transacted below the wfficient market equilibrium quantity |
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inefficient allocation to consumers |
some people who want the good badly and are willing to pay a high price dont get it, and some who care relatively little about the good are only willing to pay a low price do get it |
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inefficiently low quality |
sellers offer low-quality goods at a low price even though buyers would prefer a higher quality good at a higher price |
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black market |
a market in which goods or services are bought and sold illegally - either becasue it is illegal to sell them at all or because the prices charged are legally prhibited by a price ceiling |
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minimum wage |
a legal floor on the wage rate, which is the market price of labor |
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quota |
an upper limit on the quantity of some good tha can be bought or sold |
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demand price |
the price at which consumers will demand that quantity |
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supply price |
the price at which producers will supply that quantity |
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wedge |
a quota or quantity control drives a __ between the demand price and the supply price of a good; tht is, the price paid by buyers end up being higher than that received by sellers |
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quota rent |
the earnings that accrue to the liscence-holder from ownership of the right to sell the good; it is equal to the market price of the license when the licenses are traded; the difference between the demand and supply price at the quota limit |
