Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
88 Cards in this Set
- Front
- Back
|
Scarcity
|
Not abundant enough in nature so that everyone can have as much as they want for free
|
|
|
Free Good
|
No price, so abundant you can have all you want, free in nature
|
|
|
Scarce Good
|
NOT so abundant in nature that you can get all you want. Therefore, commands a price.
|
|
|
Resources
|
Anything occurring in nature that is used to produce or create other things.
Natural, Human, Physical |
|
|
Capital
|
Anything man-made that is used to produce or create other things
Human, Physical |
|
|
Positive Economics
|
Economic statements that can be proven or disproven
|
|
|
Normative Economics
|
Opinions, not provable or disprovable
|
|
|
Objective
|
Facts, provable or disprovable
|
|
|
Subjective
|
Opinion, not provable or disprovable
|
|
|
Poverty
|
Subjective concept
|
|
|
Marginal
|
Additional
|
|
|
Ceteris Paribus
|
"All else held constant"
|
|
|
Fallacy of Composition
|
Incorrect view that what's true for the individual will also be true for the group.
|
|
|
Statistical Murder
|
Spending an amount of money to save 50 people when you could spend the same amount on something else and save 100 people.
|
|
|
Opportunity Cost
|
The one most highly valued thing you give up when you choose one option over another
|
|
|
Transaction Costs
|
Anything that makes a transaction more expensive. Can be in terms of dollars, time or aggravation.
|
|
|
Middleman
|
Someone who or something that facilities trade. They bring together buyers and sellers rather than buyers and sellers having to hunt each other down.
|
|
|
Law of Comparative Advantage
|
The total output of a group of people, an entire economy or a group of nations will be greatest when the output of each good is produced by the person with the lowest opportunity cost for producing that good.
|
|
|
Absolute Advantage
|
Being able to produce a product using the fewest resources.
|
|
|
Production Possibilities Curve
|
Graph that shows all possible allocations of the most output that can me produced from limited resources of an economy .
|
|
|
Creative Destruction
|
New products and methods of production replacing old ones.
|
|
|
Entrepreneur
|
Someone who brings together the other three resources and produces something.
|
|
|
Capitalism
|
An economic system in which productive resources are owned privately and goods and resources are allocated through market pricing
|
|
|
Socialism
|
An economic system in which the basic means of production are owned and controlled by the government and goods and resources are allocated through government central planning.
|
|
|
Demand
|
A schedule of all the various quantities of a good or service that consumers are willing and able to buy at various prices and at a specified time, place and population
|
|
|
Law of Demand
|
There is an inverse relationship between price and quantity demanded.
|
|
|
Law of Supply
|
There is a positive direct relationship between price and quantity supplied
|
|
|
Substitutes
|
Goods that perform similar functions
|
|
|
Complements
|
Goods that are normally consumed together
|
|
|
Consumer Surplus
|
The difference between the maximum price consumers are willing and able to pay and the price that they actually pay.
|
|
|
Producer Surplus
|
The difference between the minimum price suppliers are willing and able to sell something for and the price that they actually sell it for.
|
|
|
Price Elasticity of Demand
|
Degree of responsiveness of a consumer to a change in proce
|
|
|
Change in Quantity Demand
|
When consumers buy a different amount than before BECAUSE THE PRICE CHANGED
|
|
|
Change in Demand
|
When consumers buy a different amount than before because of ANYTHING BUT a change in price
|
|
|
Profits
|
When sales revenue is greater than the cost of production
|
|
|
Losses
|
When sales revenue is less than the cost of production
|
|
|
Market Equilibrium
|
A state in which the forces of supply and demand are in balance. Quantity supplied in the market will equal quantity demanded in the market.
|
|
|
Economic Efficiency
|
A state in which all potential gains from a trade have been realized. An action is economically efficient ONLY if it creates more benefits than costs.
|
|
|
Invisible Hand Principle
|
Market prices coordinate the actions of self-intrested individuals and direct them toward activities that promote the general welfare.
|
|
|
Spontaneous Order
|
Order out of chaos--a result of human action, not of human design
|
|
|
Price Ceilings
|
Whenever price is held artificially below what the free market price would be without government intervention.
|
|
|
Price Floors
|
Whenever price is held artificially above what the free market price would be without government intervention.
|
|
|
Minimum Wage
|
An example of Price Floors. Leads to surplus of labor, unemployment.
|
|
|
Statutory Incidence of a Tax
|
On which part of the market the government actually levies a tax.
|
|
|
Tax Burden
|
Who ends up actually paying the tax.
|
|
|
Dead Weight Loss to Society
|
When taxes are levied, consumers and producer surplus is destroyed as less of the taxed product is bought or sold.
|
|
|
Laffer Curve
|
A graph that shows that increases in marginal tax rates can wither raise or lower tax revenues, depending on how high the tax rate is to begin with. It also shows that a decrease in Marginal Tax Rates can increase or decrease tax revenues depending on the same thing.
|
|
|
Marginal Tax Rates
|
Taxes on additions to you income.
(change in tax liability/change in taxable income) |
|
|
Average Tax Rates
|
On average, how much of your income that you end up paying in taxes
(tax liability/taxable income) |
|
|
Progressive Taxes
|
Tax rates that increase as your income increases, so it taxes the
|
|
|
Proportional Taxes
|
Tax rates that do not vary with income. Everyone pays the same percentage of their income in taxes.
|
|
|
Regressive Taxes
|
Tax rates that decrease as your income increases, so it taxes the poor at a greater rate than the rich.
Ex. Sales Tax |
|
|
Subsidy
|
Government pays part of the cost of a program
|
|
|
Economic Efficiency
|
Output level that corresponds to marginal cost equaling marginal benefit.
|
|
|
Positive Externality
|
The effect benefits someone who did not pay the cost
|
|
|
Negative Externality
|
The effect costs someone who did not get any of the benefits
|
|
|
Public Sector
|
Government
|
|
|
Private Sector
|
Non-Government
|
|
|
Protective- Economic Role of Government
|
Protecting individuals and their property against invasion by others
|
|
|
Productive- Economic Role of Government
|
Providing goods that cannot easily be provided through private markets
|
|
|
Public Choice
|
Economics merged with political science
|
|
|
Rational Ignorance
|
Remaining ignorant of some fact when the cost of knowing something is greater than the benefit of learning that thing
|
|
|
User Fees
|
Payment made to governments for goods or services provided by the government
|
|
|
Logrolling
|
Political favors. "You scratch my back, I'll scratch yours." Vote trading.
|
|
|
Special Interest Effect
|
An issue that generates substantial individual benefits to a small minority while imposing a small individual cost on many other citizens. In total, the net cost to the majority might either exceed or fall short of the net benefits to the special interest group.
|
|
|
Pork Barrel Legislation
|
A package of spending projects benefiting local areas but financed through the federal government. Costs typically exceed the benefits in total but these projects are popular among concentrations of voters who do not have to pay the true costs
|
|
|
Earmarking
|
Directing budgeted funds to specific projects, programs or locations.
|
|
|
Shortsightedness Effect
|
Misallocating resources because the public-sector actions are biased in favor of a project the yields immediate benefits but that has long term costs or against a project that has short term costs but that yields long term benefits.
|
|
|
Rent Seeking
|
Actions by individuals and groups designed to restructure public policy i a manner that will wither directly or indirectly redistribute more income to themselves or the projects they promote
|
|
|
Consumption-payment Linkage
|
Direct payments made for direct purchases. The person making the purchase is the person getting the benefit. Most market transactions take this form.
|
|
|
The Multiplier
|
A concept that states that one individual's expenditures become the income of another, and so on, until some original amount of money spent is multiplied many times over throughout the economy. The formula for the multiplier is 1/MPS
|
|
|
The Marginal Propensity to Save
|
Out of any additions to your income, what percent you are likely to save.
|
|
|
The Marginal Propensity to Consume
|
Out of any additions to your income, what percent are you likely to spend.
|
|
|
Disposable Income
|
Income after taxes. You can spend or save it.
|
|
|
Balanced Budget
|
When current government revenue from taxes, fees and other sources is equal to current government expenditures
|
|
|
Budget Deficit
|
When current government revenue from taxes, fees and other sources is less than current government expenditures
|
|
|
Budget Surplus
|
When current government revenue from taxes, fees and other sources is greater than current government expenditures
|
|
|
Discretional Fiscal Policy
|
A change in laws that alter government spending or tax rates.
|
|
|
Expansionary Fiscal Policy
|
An increase in government expenditures and/or a reduction in tax rates such that the expected size of the budget deficit expands.
|
|
|
Restrictive Fiscal Policy
|
A reduction in government expenditures and/or an increase in tax rates such that the expected size of the budget deficit declines.
|
|
|
Countercyclical Policy
|
A policy that tends to move the economy in an opposite direction from the forces of the business cycle. CCP would stimulate aggregate demand during the contractionary phase of the business cycle and stifle aggregate demand during an expansionary phase.
|
|
|
Automatic Stabilizers
|
Built in features that tend to automatically to promote a budget deficit during a recession and a budget surplus during an inflationary boom, even without a change in policy.
|
|
|
Per Capita GDP
|
GDP per person. (GDP/population)
|
|
|
Economic Freedom
|
Type of economic activity characterized by personal choice, voluntary exchange, freedom to compete in markets (to produce and sell), property rights protection
|
|
|
Economic Freedom of the World Index
|
Index designed to measure economic freedom of a country
|
|
|
Tariff
|
Tax on goods imported into a country. Levied by the importing country.
|
|
|
Quota
|
A limit on the number or value of goods that can be imported.
|
|
|
Embargo
|
The quota of zero. No economic trading can take place at all--no imports, no exports--between embargoed nations.
|
