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35 Cards in this Set
- Front
- Back
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economics?
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the study of how scarce resources are allocated among competing ends/uses
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Microeconomics??
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analysis of small
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Macroeconomics?
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analysis of large
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Positive economics??
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"what is" the branch of economic analysis that describes the way the economy actually works.
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normative economics?
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"what should be"- the branch of economic analysis that makes prescriptions about the way the economy should work
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4 types of Resources??
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LAND(rent): cannot create more land, supply is fixed, unlike capital
LABOR(wages):cannot be bought or sold, ability to form unions CAPITAL(intrest) ENTREPRENEURSHIP(profits=sales-costs) |
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Scare??
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resources are scare when demand exceeds supply
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Opposite of scarce resource??
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free resource
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Independent variable??
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changes by itself
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dependent variable?
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changes as a result of (depends upon) a change in an independent variable
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Markets?
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are established arrangements where buying and selling of goods takes place
-local vs. national markets -daily and monthly markets -goods and factor markets |
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opportunity costs??
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cost of the next best alternative foregone
-scarce goods have positive opportunity costs -free goods have zero opportunity costs |
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Law of increasing cost?
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as you produce more of a good (or service) its opportunity cost per unit goes up
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Law of Diminishing Returns?
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as you increase one input (land, labor, capital, entrepreneurship) in equal increments holding all other inputs the same, the additions to output will eventually diminish
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demand?
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the demand for a good or service is the amount people are prepared to buy under specified circumstances during a specified time good
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supply?
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the quantity supplied of a good or service is the amount of the good or service offered for sale at a given price, holding other factors constant
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Market Equilibrium?
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is at the intersection of demand and supply curves (it gives the equilibrium price and quantity)
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negative relationship?
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a relationship between 2 variables in which an increase in the value of 1 variable is associated with a decrease in the value of the other variable.
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Positive relationship?
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a relationship between 2 variables in which an increase in the value of one variable is associated with an increase in the value of the other variable
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production possibilites frontier?
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a model that illustrates the trade-offs facing an economy that produces only two goods. shows max quantity of 1 good that can be produced for any given quantity produced of the other
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marginal analysis?
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the study of marginal decisions
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relative price?
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the ratio of the price of one good to the price of another
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Specialization?
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a solution in which different people each engage in the different task that he or she is good at performing
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invisible hand?
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phrase used by Adam Smith to refer to the way in which an individual's pursuit of self-interest can lead, without the individual's intending it to good results for society as a whole
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money price??
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price of a good (or service) in the unit of currency( ex. dollar, pesos)
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Law of Comparative Advantage?
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focuses on specialization. it is better for individuals to specialize in those activities in which their comparative advantage over others is the greatest of their comparative disadvantage is the least
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Price elasticity of Demand?
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responsiveness of quantity demand of a good to changes in its price
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slope?
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the ratio of the "rise" to the "run", a measure of the steepness of a curve.
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income elasticity of demand?
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the % change in the quantity of a good demanded when a consumer's income changes divided by the % change in the consumer's income
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price elasticity of supply?
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a measure of the responsiveness of the quantity of a good supplied to the price of that good
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limitations of invisible hand?
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*income distribution
*role of government *monopoly *macroeconomic instability |
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crucial ingredients for exchange?
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*well-defined property rights
*low transactions costs *information/ uncertainty |
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The Economic Problem?
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*WHAT to produce?
-necessities vs. luxuries *HOW to produce? -labor intensive vs. capital intensive *for WHOM to produce |
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Factors shifting supply curve?
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*prices of other goods
*prices of relevant resources *technology *number of sellers *seller's expectations |
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Factors that shift the demand curve??
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*prices of related good (substitutes or complements)
*consumer income (normal or inferior goods) *consumer preferences *number of buyers *buyer's expectations |
