Economics

Front 1

statements about economic behavior or the economy that enable the prediction of the probable effects of certain actions

Back 1

economic principle

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a simplified representation of how something works

Back 2

model

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the social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

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economics

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the condition whereby the economic resources we use to produce goods and services are limited relative to our wants for them

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scarcity

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"economic good".. good for which you canNOT get all you want for zero cost

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scarce good

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you can get all you want at zero cost

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free good

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the sacrifice associated with making a choice; in a standard market transaction it is paid by the producer

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cost

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signal that tells producers what and how much to produce; in a standard market transaction it is paid by the consumer

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price

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out of pocket, monetary payments

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explicit / accounting costs

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most valued option forgone

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implicit/oppurtunity cost

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economic cost

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implicit + explicit

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inputs used in the production of goods and services

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factors of production

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types of economic resources

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land, labor, capital, entrepreneural ability

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consideration of the marginal (or addition) costs and marginal benefits of making a choice

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marginal analysis

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curve that graphs all possible combinations of two given goods that an economy can produce

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production possibilities frontier

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assumptions of PPF

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1. a single economy produces on two goods 2. the quantity of resources is fixed 3. technology is fixed

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as production of a good increases, the opportunity cost of producing an additional unit rises

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law of increasing opportunity cost

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constant opportunity cost

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flat PPF

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increasing opportunity cost

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bowed PPF

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Economic growth causes

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1. an increase in available resources
2. a technological improvement

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the ability to produce more in a given time frame

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absolute advantage

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exports

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production - consumption

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imports

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consumption - production

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any institution that brings buyers and sellers of a particular good or service

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market

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a table that shows how much how much of a good or service consumers will want to buy at various prices

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demand schedule

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the price of of a good and the quantity demanded are inversely related

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law of demand

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a line that shows the maximum that consumers are willing to pay for a quantity

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demand curve

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the relationship between P and Qd for all possible prices

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demand

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the number of unite consumers are willing to buy at a specific price

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quantity demanded

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a change in the amount purchased casued by a change in price

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change in quantity demanded

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Factors that shift demand curve

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1. income (inferior goods/normal goods)
2. Price of related goods (subs/compl)
3. Expectations of future prices

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Factors that increase demand

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1.increase in income
2.decrease in income
3.increase in price of sub
4.decrease in price of a compl.
5.consumers expect higher future prices
6. more buyers

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factors that decrease demand

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1. decrease in income
2.increase in income
3. decrease in price of sub.
4.increase in price of a comp.
5.consumers expect lower prices
6. fewer buyers

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a table that shows how much of a good or service producers will offer for sale at various prices

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supply schedule

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the price of a good and the quantity supplied are directly (positively) related

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law of supply

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a line that shows the minimum that producers are willing to accept as payment for any quantity

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supply curve

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the relationship between P and Qs for all possible prices

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supply

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the number of units producers are willing to offer for sale at a specific price

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quantity supplied

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a change in the amount offered for sale caused by a change in the price; a movement along the curve

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change in quantity supplied

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Factors that shift the supply curve

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1. input/resources prices
2. tech
3. expectations of future prices
4. number of sellers

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price at which the market clears

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equilibrium price

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equilibrium

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no tendency for change

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factors that increase the supply

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1. decrease in input prices
2. improvement in technology
3. producers expect lower prices
4. more sellers

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factors the decrease the supply

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1. increase in input prices
2. n/a
3. producers expect higher prices
4. fewer selllers

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the allocation of goods among consumers using prices

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price rationing

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when demand changes

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Pe and Qe change together

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when supply changes

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Pe and Qe move opposite