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32 Cards in this Set

  • Front
  • Back
Ceteris Paribus
All other things unchanging.
Production Possiblity Frontier (PPF)
-2 goods
-factor resources held constant
-tech. held constant
-downward slope
PPF's 3 regions
actual line- full employment
below line- unemployment
above line- unattainable
Circular Flow Model
shows how products, factors, and money flow thru the economy
goods and services
land, labor, capital
Households supply ___ and demand ___.
supply factors and demand products
Firms supply ___ and demand ___.
supply products and demand factors
Comparative Advantage
has a lower opportunity cost (gives up less when they produce more of this good).
Absolute Advantage
produces a good "better" than another (able to produce more)
Positive Economics
what is, descriptive, CAN be resolved by an appeal to the facts.
Normative Economics
what should, prescriptive, AREresolved by an appeal to the polls
Competitive Market (what model shows this)
many buyers and sellers of the same good or service (supply and demand model)
4 Principal Factors that cause demand to shift
1. change in price of related goods
2. change in consumer income
3. change in taste
4. change in expectations
Substitute Cost (example)
x instead of y (pepsi vs. coke)
Complements (example)
x and y consumed together (cereal and milk)
4 Principal Factors that cause supply shift
1. change in input price
2. change in tech.
3. change in expectations
4. change in gov't regulations and business tax
goods used to produce other goods (land, labor, capital, materials)
Input Prices
cost of production
way we turn inputs into goods
Equilibrium Price (another name)
market-clearing price
Disequilibrium Concepts (2)
surplus, shortage
Price Controls
legal restrictions on how high or how low a market price may go
1. price ceilings
2. price floors
Price Ceilings
-how high
-support consumption
-create shortages when binding
4 Inefficiencies Created by Price Ceilings
-wasted resources
-"low quality" of goods
-black markets
-not all customers get it
Price Floors
-how low
-minimum wage
-promote income
-create surplus when binding
4 Inefficiencies Created by Price Floors
-wasted resources
-illegal activity
-too high quality
-not all sellers can sell product
upper limit on the quantity of some good that can be bought or sold
Quota Limit
amount that can be legally transacted
gives owner right to supply a good
Excise Tax
fixed tax on the unit of a good/service that is bought or sold
Tax Incidence
refers to who actually bears burden of tax