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36 Cards in this Set

  • Front
  • Back
Circular Flow Diagram
a visual model of the economy that shows how dollars flow through markets amount households and firms
macroeconomics
the study of economy wide phenomena, including inflation, unemployment, and economic growth
microeconomics
the study of how households and firms make decisions and how they interact in markets
normative statements
claims that attempt to prescribe how the world should be
positive statements
claims that attempt to describe the world as it is
production possibilities frontier
a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
absolut advantage
the ability to produce a good using fewer inputs than another producer
comparative advantage
the ability to produce a good at a lower opportunity cost than another producer
exports
good and services that are produced abroad and sold domestically
opportunity cost
whatever must be given up to obtain some item
competitive market
a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker
complements
tow goods for which an increase in the price of one leads to a decrease in the demand for the other
demand curve
a graph of the relationship between the price of a good and the quantity demanded
demand schedule
a table that shows the relationship between the price of a good and the quantity demanded
equilibrium
a situation in which the market price has reached the level at which quantity supplied equals quantity demanded
equilibrium price
the price that balances quantity supplied and quantity demanded
equilibrium quantity
the quantity supplied and the quantity demanded at the equilibrium price
inferior good
a good for which, other things equal, an increase in income leads to a decrease in demand
law of demand
the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises
law of supply
the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
law of supply and demand
the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
market
a group of buyers and seller of a particular good or service
normal good
a good for which, other things equal, an increase in income leads to an increase in demand
quantity demand
the amount of a good that buyers are willing and able to purchase
quantity suppled
the amount of a good that sellers are willing and able to sell
shortage
a situation in wich quantity demanded is greater than quantity supplied
substitutes
two goods for which an increase in the price of one leads to an increase in the demand for the other
supply curve
a graph of the relationship between the price of a good and the quantity supplied
supply schedule
a table that shows the relationship between the price of a good and the quantity supplied
surplus
a situation in which quantity supplied is greater than quantity demanded
cross-price elasticity of demand
a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second good
elasticity
a measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants
income elasticity of demand
a measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as the percentage change in quantity demanded divided by the percentage change in income
price elasticity of demand
a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price
price elasticity of supply
a measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in price quantity supplied divided by the percentage change in price
total revenue(in a market)
the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold