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26 Cards in this Set
- Front
- Back
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Demand |
A schedule or curve that shows the quantity of a particular good being demanded at a range of prices in a particular period of time. |
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Law of Demand |
Ceteris Paribus, there is a inverse relationship between the price of goods and the quantity demanded by consumers. At a higher price, less of a particular goods tends to be demanded. Can be explained by the income effect, the substitution effect and the law of diminishing marginal utility. |
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Supply |
A schedule or curve showing the direct relationship between the quantity of output firms produce in a particular period of time in a variety of prices. |
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Law of supply |
Ceteris Paribus, there exist a direct relationship between the price of goods and quantity supplied by producers. Explains why the curve slopes upwards. As price of goods rises, sellers wish to supply greater quantity as a possibility as economics profits is greater. At lower prices, less output is produced since it is harder to earn profit. Firms are profit seekers. |
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Normal Good |
Goods that consumers demand more of as their income rises and less of as their incomes fall. For example restaurant meals |
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Inferior Goods |
Goods that consumers demand less of as their income rises and more of as their incomes fall. For example restaurant. |
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Substitude Goods |
When a good can be used instead of another good, then two goods are substitutes. For instance, Coke and Pepsi are substitute, the demand for one is directly related to the price of it's substitute. |
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Complementary Goods |
Goods that are used in conjunction of another goods. They are basically consumed together. Fro example hamburgers and french fries. |
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Tax |
A payment made by an individual or a firm to the government, usually levied on income, property or the consumption of goods and services. Taxes are leakage from the circular flow of income. but they provide government with the money they use to provide government services and public goods. |
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Subsidy |
A payment made by government to the individuals or firms for the production of consumptions or particular goods and services. Subsidies reduce the cost of production or increase the benefit of consumption, and therefore led to a greater equilibrium quantity in the market for the subsidised goods. |
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Supply Shock |
Anything that leads to a sudden, unexpected change in good's supply. Can be negative (decreases supply) or positive (increases supply). May result from a change in energy prices, wages and business taxes, or maybe result from natural disaster or new discovery of important recourses. |
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Equilibrium |
Refers to the price and quantity determined in a market when the supply equals the demand. At equilibrium there are no surpluses or shortages of production; at the equilibrium price the quantity supplied equals the quantity demanded. |
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Marginal Social Benefits |
The benefits experienced by the individual consumers of a particular good, plus or minus any social or environmental benefits or cost. MSB can be greater than marginal private benefit if there are positive externalities of consumption or less than MPB if there are negative externalities of consumption. |
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Marginal Social Cost |
The private cost made by producers of a particular good plus any external cost placed on third parties, such as environmental or social cost, arising from good's production. |
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Consumer's Surplus |
The additional benefit being enjoyed by consumers who are willing to pay more for a product than the market price. Graphically it is the triangle below the demand curve and above the equilibrium price, out to the equilibrium quantity. |
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Producer Surplus |
The additional benefit being enjoyed by the producer who are willing to sell more their product for less than the market price. Graphically it is the area below the equilibrium price and above the supply curve, out to the equilibrium price. |
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Scarcity |
When something is both desired and limited in supply. All recourses (land, labor, capital) are limited in supply, yet desired for their use in the production of goods and services. |
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Opportunity Cost |
What must be given up to have anything else. Not necessarily monetary cost, rather include what you could to with the recourses you use to undertake any activity or exchange. |
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Free Market Economy |
A economic system in which recourses are allocated purely by the forces of demand, supply and the price mechanisms. The government has no influence over what is produced, how it is produced for whom. |
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Command Economy |
An economy system in which recourses are allocated through central planning, usually by the state or central of government. |
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Regulation |
Rules that are imposed to protect worker's rights and to prevent consumers from the deception of producers or firms. |
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Supply Substitute |
A good that can have an alternative using the same resources. As the price of a good begins to increase, firms will tend to produce more of that good in opposition to its supply substitute. |
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PPC |
A graph that shows the various combinations of output that an economy can possibly produce given the available factors of production and the available production of technology. |
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Law of Increasing Opportunity Cost |
As more of a particular product is produced, the opportunity cost in terms of what must be given up of other goods increases. Explains the convex shape of a nation's production possibilities curve. |
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Factors of Production |
Include the human and natural recourse needed to produce any good or service : Land, Labor, Capital and Entrepreneurship |
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Price Mechanisms |
Determines the allocation of recourses between society's competing wants and needs in a free market system. Prices act as signals from buyers to sellers as to what is most demanded by society. |
