Econ First Midterm

Front 1

economy

Back 1

system for coordinating society's productive activities

Front 2

economics

Back 2

social science that studies production, distributing, and consumption of goods and services

Front 3

market economy

Back 3

economy in which decisions about production and consumption are made by individual producers and consumers

Front 4

microeconomics

Back 4

branch of economics that studies how people make decisions and how these decisions interact

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economic growth

Back 5

growing ability of the economy to produce goods and services

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resource

Back 6

anything that can be used to produce something else

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trade-off

Back 7

when you compare the costs with the benefits of doing something

Front 8

marginal decisions

Back 8

decisions about whether to do a bit more or a bit less of an activity

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incentive

Back 9

anything that offers rewards to people who change their behavior

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specialization

Back 10

each person specializes in the task that he or she is good at performing

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efficient

Back 11

if it takes all opportunities to make some people better off without making other people worse off

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equity

Back 12

everyone gets his or her own fair share

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production possibility frontier(PPF)

Back 13

illustrates the trade-offs facing an economy that produces only two goods. It shows the maximum quantity of one good that can be produced for any given quantity produced of the other

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comparative advantage

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opportunity cost of producing the good or service is lower for that individual than for other people

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firm

Back 15

an organization that produces goods and services for sales

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positive economics

Back 16

branch of economic analysis that describes the way economy actually works

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normative economics

Back 17

makes prescriptions about the way the way economy should work

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autarky

Back 18

a situation in which a country does not trade with other countries

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domestic demand curve

Back 19

shows how the quantity of a good demanded by domestic consumers depends on the price of that good

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domestic supply curve

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shows how the quantity of a good supplied by domestic producers depends on the price of that good

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world price

Back 21

price at which that good can be bought or sold abroad

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free trade

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government does not attempt either to reduce or to increase the levels of exports and imports that occur naturally as a result of supply and demand

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tariff

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tax levied on imports

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import quota

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legal limit on the quantity of a good that can be imported

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competitive market

Back 25

a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold

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substitutes

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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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complements

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if a rise in the price of the one good leads to a decrease in the demand for the other good

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normal good

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when a rise in income increases the demand of a good

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inferior good

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when a rise in income decreases the demand for a good

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input

Back 30

good or service that is used to produce another good or service

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willingness to pay

Back 31

maximum price at which he or she would buy that good

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cost

Back 32

the lowest price at which he or she is willing to sell a good

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inefficient

Back 33

some people could be made better off without making other people worse off

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price elasticity of demand

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ratio of percent change in the quantity demanded to the percent change in the price as we move along the demand curve

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perfectly inelastic

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when the quantity demanded does not correspond at all to changes in price. demand curve is vertical line

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perfectly elastic

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when any price increase will cause quantity demanded to drop to zero. demand curve is horizontal line

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elastic

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if the price elasticity of demand is greater than 1

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inelastic

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if the price elasticity of demand is less than 1

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unit-elastic

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if the price elasticity of demand is exactly 1

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total revenue

Back 40

total value of sales of a good or service. it is equal to the price multiplied by quantity sold

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perfectly inelastic supply

Back 41

when the price elasticity of supply is zero, so that changes in the price of the good have no effect on the quantity supplied. vertical line

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perfectly elastic supply

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when even a tiny increase or reduction in the price will lead to very large changes in the quantity supplied so that the price elasticity of supply is infinite. horizontal line

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price controls

Back 43

legal restrictions on how high or low a market price may go

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price ceiling

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maximum price sellers are allowed to charge for a good or service

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price floor

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minimum price buyers are required to pay for good or service

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deadweight loss

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the loss in total surplus that occurs whenever an action or a policy reduces the quantity transacted below the efficent market equilibrium quantity

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inefficient allocation to consumers

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people who want the good badly and are willing to pay a high price don't get it, and those who care little and are only willing to pay a low price get it

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inefficient low quality

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sellers offer low-quality good at low price even though buyers would prefer a higher quality at higher price

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black market

Back 49

a market in which goods or services are bought and sold illegally

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inefficient allocation of sales among sellers

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those who would be willing to sell the good at the lowest price are not always those who manage to sell it

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quantity control(quota)

Back 51

upper limit on the quantity of some good that can be bought or sold