Economics Chap 1 Vocab

Front 1

Scarcity

Back 1

The limited nature of society's resources.

Front 2

Economics

Back 2

The study of how society manages its scarce resources

Front 3

Efficiency

Back 3

The property of society getting the most it can from its scarce resources.

Front 4

Equality

Back 4

The property of distributing economic prosperity uniformly among the members of society.

Front 5

Opportunity Cost

Back 5

Whatever must be given up to obtain some item.

Front 6

Rational People

Back 6

People who systematically and purposefully do the best they can to achieve their objectives.

Front 7

Marginal Changes

Back 7

Small incremental adjustments to a plan of action.

Front 8

Incentive

Back 8

Something that includes a person to act.

Front 9

Market Economy

Back 9

An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.

Front 10

Property Rights

Back 10

The ability of an individual to own and exercise control over scarce resources.

Front 11

Market Failure

Back 11

A situation in which a market left on its own fails to allocate resources efficiently.

Front 12

Externality

Back 12

The impact of one person's actions on the well-being of a bystander.

Front 13

Market Power

Back 13

The ability of a single economic actor or small group of actors to have a substantial influence on market prices.

Front 14

Productivity

Back 14

The quantity of goods and services produced from each unit of labor input

Front 15

Inflation

Back 15

An increase in the overall level of prices in the economy.

Front 16

Business Cycle

Back 16

Fluctuations in economic activity, such as employment and production.

Front 17

Circular-Flow Diagram

Back 17

A visual model of the economy that shows how dollars flow though markets among households and firms

Front 18

Markets for Goods and Services

Back 18

-Firms Sell
-Households buy

Front 19

Markets for Factors of Production

Back 19

-Households sell
-Firms buy

Front 20

Production Possibilities Frontier

Back 20

A graph that shows the combination of output that the economy can possibly produce given the available factors of production and the available production technology

Front 21

Microeconomics

Back 21

The study of how households and firms make decisions and how they interact in markets

Front 22

Macroeconomics

Back 22

The study of economy-wide phenomena, including inflation, unemployment, and economic growth

Front 23

Positive Statements

Back 23

Claims that attempt to describe the world as it is

Front 24

Normative Satements

Back 24

Claims that attempt to prescribe how the world should be

Front 25

Absolute Advantage

Back 25

The ability to produce a good using fewer inputs than another producer

Front 26

Comparative Advantage

Back 26

The ability to produce a good at a lower opportunity cost than another producer

Front 27

Imports

Back 27

Goods produced abroad and sold domestically

Front 28

Exports

Back 28

Goods produced domestically and sold abroad

Front 29

Market

Back 29

A group of buyers and sellers of a particular good or service

Front 30

Competitive Market

Back 30

A market in which there are many buyers and many sellers so that each has a negligible impact on the market price

Front 31

Quantity Demanded

Back 31

The amount of a good that buyers are willing and able to purchase

Front 32

Law of Demand

Back 32

The quantity demanded of a good falls when the price of a good rises

Front 33

Demand Schedule

Back 33

A table that shows the relationship between the price of a good and the quantity demanded

Front 34

Demand Curve

Back 34

A graph of the relationship between the price of a good and the quantity demanded

Front 35

Normal Good

Back 35

A good for which, other things equal, an increase in income leads to an increase in demand

Front 36

Inferior Good

Back 36

A good for which, other things equal, an increase in income leads to a decrease in demand

Front 37

Substitutes

Back 37

Two goods for which an increase in the price of one leads to an increase in the demand for the other

Front 38

Complements

Back 38

Two goods for which an increase in the price of one leads to a decrease in the demand for the other

Front 39

Quantity Supplied

Back 39

The amount of a good that sellers are willing and able to sell

Front 40

Law of Supply

Back 40

The quantity supplied of a good rises when the price of a good rises

Front 41

Supply Schedule

Back 41

A table that shows the relationship between the price of a good and the quantity supplied

Front 42

Supply Curve

Back 42

A graph of the relationship between the price of a good and the quantity supplied

Front 43

Equilibrium

Back 43

A situation in which the market price has reached the level at which quantity supplied equals quantity demanded

Front 44

Equilibrium Price

Back 44

The price that balances quantity supplied and quantity demanded

Front 45

Equilibrium Quantity

Back 45

The quantity supplied and the quantity demanded at the equilibrium price

Front 46

Surplus

Back 46

A situation in which quantity supplied is greater than quantity demanded

Front 47

Shortage

Back 47

A situation in which quantity demanded is greater than the quantity supplied

Front 48

Law of Supply and Demand

Back 48

The claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance