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75 Cards in this Set
- Front
- Back
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Economics
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The science of scarcity: the science of how individuals and societies deal with the fact that wants are greater than the limited resources available to satisfy those wants.
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Scarcity
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The condition in which our wants are greater the limited resources availabe to satisfy those wants.
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Positve Economics
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The study of "what is" in economic matters.
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Normativ Economics
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The study of "what should be" in economic matters.
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Microeconomics
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The branch of economicsthat deals with human behavior and choices as they relate to relatively small units- an individual, a firm, an industry, a single market.
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Macroeconomics
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The branch of economics that deals with human behavior and choices as they relate to highly aggregate markets ( such as the goods and services market) or the entire economy.
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Utility
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The satisfaction one receives from a good.
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Good
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Anything from which individuals receive utility or satisfaction.
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Disutility
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The dissatisfaction one receives from a bad.
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Bad
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Anything from which individuals recieve disutilityor dissatisfaction.
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Land
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All natural resources, such as minerals, forests, water, and uniproved land.
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Labor
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The physical and mental talents people contribute to the production process.
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Capital
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Produced goods that can be used as inputs for further production, such as factories, machinery, tools, computers, and buildings.
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Entrepreneurship
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The particular talent that some people have for organizing the resources of land, labor, and capital to produce goods, seek new business opportunities, and develop new ways of doing things.
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Rationing Device
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A means for deciding who gets what of available resources and goods.
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Opportunity Cost
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The most highly valued opportunity or alternative forfeited when a choice is made.
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Marginal Benefits
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Additional benefits. The benefits connected to consuming an additional unit of a good or undertaking one more unit of an activity.
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Marginal Costs
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Additional costs. The costs connected to consuming an additional unit of a good or undertaking one more unit of an activity.
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Decisions at the Margin
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Decision making characterized by weighing the additional (marginal benefits of a charge against the addtional (marginal) costs of a change with respect to current conditions.
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Efficiency
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Exists when marginal benefits equal marginal costs.
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Equilibrium
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Equilibrium means "at rest"; it is descriptive of a natural resting place.
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Ceteris Paribus
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A Latin term meaning "all other things constant," or" nothing else changes.
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Fallacy of Composition
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The erroneous view that what is good or true for the individual is neccesarily good or true for the group.
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Theory
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An abstract representation of the real world designed with the intent to better understand that world.
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Abstract
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The process (used in building a theory) of focusing on a limited number of variables to explain or predict an event.
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Gross Domestic Product (GDP)
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The value of the entire output produced anually wihtin a country's borders.
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Production Possibilities Frontier (PPF)
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Represents the possible combinations of the two goods that can be produced in a certain period of time, under the conditions of a given state if technology and fully employed resources.
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Law of Increasing Opportunity costs
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As more of a good is produced, the opportunity costs of producing that good increase.
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Productive Efficiency
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The condition where the maximum output is produced with given resources and technology.
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Productive Inefficiency
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The condition where less than the maximum output is produced with given resources and technology. Productive inefficiency implies that more of one good can be produced without any less of another good being produced.
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Technology
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The body of skills and knowledge concerning the use of resources in production. An advance in technology commenly refers to the abillity to produce more output with a fixed amount of resources or the ability to produce the same output with fewer resources.
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Trade (Exchange)
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The process of giving up one thing for something else.
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Ex Ante
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Phrase that means "before," as in before a trade.
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Trade (Exchange)
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The process of giving up one thing for something else.
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Ex Post
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Phrase that means "after," as in after a trade.
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Terms of Trade
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How much of one thing is given up for how much of something else.
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Mixed Capitalism
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An economic system characterized by largely private ownership of factors of production, market allocation of resources, and decentralized decision making. Most economic activities take place in the private sector in this system, but governmentplays a substantial economic and regulatory role.
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Technology
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The body of skills and knowledge concerning the use of resources in production. An advance in technology commenly refers to the abillity to produce more output with a fixed amount of resources or the ability to produce the same output with fewer resources.
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Comparative Advantange
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The situation where someone can produce a good at lower opportunity cost than someone else can.
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Economic System
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The way in which society decides to answer key economic questions- in particular those questions that relate to production and trade.
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Property Rights
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Refer to the laws, regulations, rules, and social customs that define what an individual can and cannot do in society.
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Ex Post
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Phrase that means "after," as in after a trade.
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Transaction Costs
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The costs associated with the time and effort needed to search out, negotiate, and consummate an exchange.
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Comparative Advantange
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The situation where someone can produce a good at lower opportunity cost than someone else can.
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Property Rights
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Refer to the laws, regulations, rules, and social customs that define what an individual can and cannot do in society.
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Demand
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The willingness and ability of buyers to purchase different quatities of a good at different prices during a specific time period.
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Law of Demand
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As the price of a good rises, the quantity demanded of the good falls, and as the price of a good falls, the quantity demended of the good rises, ceteris paribus.
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Demand Schedule
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The numerical tabulation of the quantity demanded of a good at different prices. A demand schedule is the numerical representation of the law of demand.
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Absolute (Money) Price
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The price of a good in money terms.
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Relative Price
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The price of a good in terms of another good.
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Law of Diminishing Marginal Utility
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For a given period, the marginal utility or satisfaction gained by consuming equal successive units of a good will decline as the amount consumed increases.
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Own Price
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The price of a good. For example, if the price of oranges is $1, this is (it's) own price.
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Normal Good
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A good the demand for which rises (falls) as income rises (falls).
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Inferior Good
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A good the demand for which falls (rises) as income rises (falls).
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Neutral Good
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A good the demand for which does not change as income rises or falls.
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Substitutes
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Two goods that satisfy similar needs or deisres. If two goods are substitutes, the demand for one rises as the price of the other rises (or the demand for one falls as the price of the other falls).
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Complements
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Two goods that are used jointly in consumption. If two goods are complements, the demand for one rises as the price of the others falls ( or the demand for one falls as the price of the other rises).
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Supply
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The willingness and ability of sellers to produce and offerr to sell different quantities of a good at different prices during a specific time period.
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Law of Supply
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As the price of a good rises, the quantity supplied of the good rises, and as the prices of a good falls, the quantity supplied of the good falls, ceteris paribus.
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Supply Schedule
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The numerical tabulation of the quantity supplied of a good at different prices. A supply schedule is the numerical representation of the law of supply.
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(Production) Subsidy
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A monetary payment by government to a producer of a good or service.
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Surplus (Excess Supply)
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A condition in which quantity supplied is greater than quantity demanded. Surpluses occur only at prices above equilibrium price.
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Shortage (Excess Demand)
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A condition in which quantity demanded is greater than quantity supplied. Shortages occur only at prices below equilibrium price.
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Equilibrium Price (Market Clearing Price)
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The price at which quantity demanded of the good equals quantity supplied.
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Equilibrium Quantity
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The quantity that corresponds to equilibrium price. The quantity at which the amount of the good that buyers are willing and able to buy equals the amount that sellers are willing to sell, and both equal the amount actually bought and sold.
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Disequilibrium Price
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A price other than equilibrium price. A price at which quantity demanded does not equal quantity supplied.
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Disequilibrium
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A state of either surplus or shortage in a market.
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Equilibrium
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Equilibrium means "at rest". Equilibrium in a market is the price-quantity combination from which there is no tendency for buyers or sellers to move away. Graphically, equilibrium is the intersection point of the supply curve and demand curve.
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Consumers' Surplus (CS)
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The difference between the maximum price a buyer is willing and able to pay for a good or sevice and the price actually paid. CS = Maximum buying Price - Price paid.
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Producers' Surplus (PS)
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The difference between the price sellers receive for a good and the minimum or lowest price which they would have sold the good. PS = Price received - Minimum selling Price.
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Total Surplus
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The sum of consumers' surplus and producers' surplus. TS= CS + PS
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Price Ceiling
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A government-mandated maximum price above which legal trades cannot be made.
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Tie-in Sale
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A sale whereby one good can be purchased only if another good is also purchased.
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Price Floor
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A government-mandated minimum price below which legal trades cannot be made.
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Deadweight Loss
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The loss to society of not producing the competitive, or supply-and-demand determined, level of output.
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