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