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25 Cards in this Set
- Front
- Back
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Scarcity
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the concept that there is less of something freely available from nature than people would like.
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Resources
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An input used to produce an economic good.
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Capital
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Human made resources used to produce other goods and services
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utility
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the subjective benefit or satisfaction a person expects from a choice or course of action.
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opportunity cost
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the highest valued alternative that must be sacrificed when choosing an option.
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Marginal
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describes the effect of a change in the current situation.
same as change or additional |
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Law of diminishing marginal utility
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as consumption increases, the marginal utility derived from each additional consumption
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coercion
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someone will devote resources to make you worse off if you don't comply
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The Law of comparative advantage
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individuals, economies, and nations should produce that which they can make at a lower opportunity cost and trade for everything else.
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Transaction Costs
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The time, effort, and other resources needed to search out and complete an exchange.
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Middle Man
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a person who buys and sells goods and services or arranges trades. A middleman reduces transaction costs..
ex. grocery store |
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Profit
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an excess of sales revenue relative to the opportunity cost of production.
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loss
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a deficit of sales revenue relative to the opportunity cost of production
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creative destruction
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the replacement of old products and production methods by innovative new ones that consumers judge to be superior.
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The Invisible Hand Principle
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the tendency for people, while pursuing their own interests to promote the economic well-being of society.
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The Law of Demand
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There is an inverse relationship between the price of a good and the quantity that buyers are willing to purchase.
Downward slope |
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Consumer Surplus
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The difference between the maximum amount consumers would be willing to pay and the amount that they actually pay.
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Change in quantity demanded
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a movement along the curve caused by: a change in the price of that good.
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change in demand
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a shift of the curve: caused by a change in anything that affects demand other than the price of the good.
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shifters of demand
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1: change in consumer income
a. normal goods b. inferior goods 2: change in number of consumers 3.change in the price of a related good a. substitutes b. compliments 4.change in expectations a. expected change in price or income 5. change in consumer tastes and preferences |
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The law of supply
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there is a direct (positive) relationship between the price of a good or service and the amount that suppliers are willing to produce.
Upward sloping |
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producer surplus
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the difference between the minimum price suppliers are willing to accept and the price they actually receive.
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change in quantity supplied
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a movement along the curve caused by a change in the price of that good.
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change in supply
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a shift of the curve caused by a change in anything that affects supply other than the price of the good
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Shifters of supply
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a change in
resource price technology nature & politics taxes |
