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30 Cards in this Set

  • Front
  • Back
Define microeconomics
study of economic activities of consumers, busn. indust. and the way production and income works between them
Goal of microeconomics
to analyze the way prices of goods and services are set and how sources are allocated in society
efficient allocation of resources means:
both production and distribution are efficient
opportunity cost
fundamental concept
what needs to be given up to produce a good or service
what are the 3 main econ. resources
Land, Labor, Capitol
define production possibility frontier
rel. between 2 types of output that defines trade off in allocating resources from the prod of 1 good to the other.
Law of diminishing returns
when addition of more workers creates decrease in output
production possibility curve
the most produce that can be produced with exisiting resources on a curve
3 types of business entities
define sole proprietorship
one person owns a company and his personal assets are risked
jointly owned/limited partners contribution is restricted to supplying capital and profit sharing
similar legal rights as a natural person-LLC limited liability company and stockholds hold no liability
supply and demand
basic model economists put together to explain economy
who first articulated supply and demand theory?
Alfred Marshall in 1890
concept of demand:
relationship between market price and quantity of the good or service purchased over a period of time
define: Law of supply
the higher the price of a good or service, the greater the quantity supplied-an upward sloping curve
direct relationship between price and quantity supplied
define market equilibrium
when the quantity demanded equals the quantity supplied
when supply increases and demand remains constant what happens to the equilibrium price?
the equilibrium price decreases and the equilibrium quantity increases
when supply decreases and demand is constant what happens to the equilibrium price?
the equil. price increases
the equil. quantity decreases
define surplus
when the price is above market equilibrium/ quantity exceeds demand
define shortage
when the price is below the market equilibrium/ quantity demanded exceeds quantity supplied
Define elasticity
in economic terms it means responsiveness-can the company respond quickly to a price change
Define elasticity of demand
the demand responds to change
define inelasticity of demand
The demand for an item is consistent despite change-example: oil prices rise but gasoline is still purchased
define perfect elastic
the quantity demanded stays the same regardless of price/graphed this is a straight line
define perfectly ineslastic
the price stays the same regarless of quantity demanded/graphed this is vertical
defn elasticity of supply
the supply responds to change
defn inelasticity of supply
the supply is consistent despite change
dfn perfectly elastic
the price stays the same no matter the quantity supplied/horizontal curve
dfn perfectly inelastic
quantity stays the same regardless of the price/vertical curve