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103 Cards in this Set
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- Back
- 3rd side (hint)
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Ceteris paribus
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the Latin expression meaning other variables being held fixed.
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Economics
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The study of choices when there is scarcity.
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Entrepreneurship
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The effort used to coordinate the factors of production—natural resources, labor, physical capital, and human capital—to produce and sell products.
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Factors of production
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the resources used to produce goods and services; also known as production inputs: Natural Resources, Labor, Physical and Human Capital and Entrepreneurship.
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Human capital
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the knowledge and skill acquired by a work through education and experience.
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Labor
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The physical and mental effort people use to produce goods and services.
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Macroeconomics
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The study of the nation’s economy as a whole; focuses on the issues of inflation, unemployment, and economic growth.
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Marginal change
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A small, one-unit change in value.
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Microeconomics
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The study of the choices made by households, firms, and government and how these choices affect the markets for goods and services.
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Natural resources
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Resources provided by nature and used to produce goods and services.
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Normative analysis
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Answers the question “What ought to be?”
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Physical capital
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The stock of equipment, machines, structures, and infrastructure that is used to produce goods and services.
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Positive analysis
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Answers the question “What is?” or “What will be?”
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Scarcity
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The resources we use to produce goods and services are limited.
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Variable
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A measure of something that can take on different values.
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Marginal benefit
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The additional benefit resulting from a small increase in some activity.
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Marginal cost
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The additional cost resulting from a small increase in some activity.
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Nominal value
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The face value of an amount of money.
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Opportunity cost
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The value of the next best alternative which is sacrificed to get something else.
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Production possibilities curve
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A curve that shows the possible combinations of products that an economy can produce, given that its productive resources are fully employed and efficiently used.
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Real value
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The value of an amount of money in terms of what it can buy.
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Absolute advantage
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The ability of one person or nation to produce a product at a lower resource cost than another person or nation.
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Centrally planned economy
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An economy in which government bureaucracy decides how much of each good to produce, how to produce the good, and who gets them.
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Comparative advantage
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The ability of one person or nation to produce a good at a lower opportunity cost than another person or nation.
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Export
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A product produced in the home country and sold in another country.
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Import
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A product produced in a foreign country and purchased by residents of the home country.
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Market economy
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An economy in which people specialize and exchange goods and services in markets.
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Change in demand
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A shift of the demand curve caused by a change in a variable other than the price of the product
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Change in quantity demanded
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A change in the quantity consumers are willing and able to buy when the price changes; represented graphically by movement along the demand curve.
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Change in quantity supplied
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A change in the quantity firms are willing and able to sell when the price changes; represented graphically by movement along the supply curve.
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Change in supply
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a shift of the supply curve caused by a change in a variable other than the price of the product.
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Complements
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Two good for which a decrease in the price of one good increases the demand for the other good.
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Demand schedule
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A table the shows the relationship between the price of a product and the quantity demanded, ceteris paribus.
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Excess demand
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Shortage--A situation in which, at the prevailing price, the quantity demanded exceeds the quantity supplied.
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Excess supply
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Surplus--A situation in which at the prevailing price the quantity supplied exceeds the quantity demanded.
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Individual demand curve
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A curve the shows the relationship between the price of a good and quantity demanded by an individual consumer, ceteris paribus.
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Individual supply curve
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A curve showing the relationship between price and quantity supplied by a single firm, ceteris paribus.
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Inferior good
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A good for which an increase in income decreases demand.
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Law of demand
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There is a negative relationship between price and quantity demanded, ceteris paribus.
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Law of supply
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There is a positive relationship between price and quantity supplied, ceteris paribus.
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Market demand curve
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A curve showing the relationship between price and quantity demanded by all consumers, ceteris paribus.
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Market supply curve
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A curve showing the relationship between the market price and quantity supplied by all firms, ceteris paribus.
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Market equilibrium
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: A situation in which the quantity demanded equals the quantity supplied at the prevailing market price.
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Minimum supply price
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The lowest price at which a product will be supplied.
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Normal good
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A good for which an increase in income increases demand.
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Perfectly competitive market
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A market with so many buyers and sellers that no single buyer or seller can affect the market price.
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Quantity demanded
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The amount of a product that consumers are willing and able to buy.
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Quantity supplied
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The amount of a product that firms are willing and able to sell.
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Substitute
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Two good for which an increase in the price of one good increased the demand for the other good.
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Supply Schedule
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A table that shows the relationship between the price of a product and quantity supplied, ceteris paribus.
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Chain-weight index
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A method for calculating changes in prices that uses an average base years from neighboring years.
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Consumption expenditures
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Purchases of newly produced goods and services by households.
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Depression
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The common name for a severe recession.
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Depreciation
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Reduction in the value of capital goods over a one-year period due to physical wear and tear and also to obsolescence.
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Economic growth
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Sustained increase in the real GDP of an economy over a long period of time.
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Expansion
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The period after trough in the business cycle during which the economy recovers.
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GDP deflator
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An index that measures how the prices of goods and services included in GDP change over time.
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Government purchases
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Purchases of newly produced goods and services by local, state and federal governments.
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Gross Domestic Product (GDP)
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The total market value of final goods and services produced within an economy in a given year.
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Gross investment
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Total new investment expenditures.
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Gross National Product (GNP)
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GDP plus net income earned abroad.
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Inflation
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Sustained increases in the average prices of all goods and services.
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Intermediate good
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Goods used in the production process that are not final goods and services.
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National income
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The total income earned by a nation’s residents both domestically and abroad in the production of goods and services.
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Net exports
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Exports minus imports.
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Net investment
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Gross investment minus depreciation.
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Nominal GDP
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The value of GDP in current dollars.
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Peak
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The date at which a recession starts.
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Personal income
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Income, including transfer payments, received by households.
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Personal disposable income
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Personal income that households retain after paying taxes.
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Private investment expenditures
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Purchases of newly produced good and service by firms.
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Real GDP
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A measure of DGP that controls for changes in prices.
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Recession
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Commonly defined as six consecutive months of declining GDP.
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Trade Deficit
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The excess of imports over exports
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Trade surplus
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The excess of exports over imports
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Transfer payments
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Payments from governments to individuals that do not correspond to the production of goods and services.
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Trough
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The date at which output stops falling in a recession.
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Value added
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The sum of all the income—wages, interest, profits, and rent—generated by an organization.
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Anticipated inflation
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Inflation that is expected.
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Consumer Price Index (CPI)
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A price index that measures the cost of a fixed basket of goods chosen to represent the consumption pattern of a typical consumer.
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Cost of Living Adjustment (COLA)
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Automatic increases in wages or other payments that are tied to the CPI.
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Cyclical unemployment
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Unemployment that occurs during fluctuations in real GDP.
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Deflation
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Negative inflation or falling prices of goods and services.
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Discouraged workers
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Workers who left the labor force because they could not find jobs.
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Frictional unemployment
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Unemployment that occurs with the normal workings of the economy, such as workers taking time to search for suitable jobs and firms taking time to search for qualified employees.
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Full employment
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The level of unemployment that occurs when the unemployment rate is at the natural rate.
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Hyperinflation
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An inflation rate exceeding 50 percent per month.
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Inflation rate
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The percentage rate of change in the price level.
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Labor force participation rate
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The percentage of the population over 16 years of age that is in the labor force.
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Menu costs
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The costs associated with changing prices and printing new price lists when there is inflation.
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National rate of unemployment
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The level of unemployment at which there is no cyclical unemployment. It consists of only frictional and structural unemployment.
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Seasonal unemployment
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The component of unemployment attributed to seasonal factors.
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Shoe-leather coss
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Costs of inflation that arise from trying to reduce holdings of cash.
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Structural unemployment
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Unemployment that occurs when there is a mismatch of skills and jobs.
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Unanticipated inflation
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Inflation that is not expected.
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Unemployment insurance
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Payments unemployed people receive from the government.
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Unemployment rate
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The percentage of the labor force that is unemployed.
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What are the five factors of production (ch. 1)?
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Natural resources, Labor, Physical Capital, Human Capital and Entrepreneurship
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What are the four main elements to the economic way of thinking?
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Use assumptions to simplify, isolate variables, think at the margin and rational people respond to incentives.
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What factors cause an increase in demand?
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Increased income, decrease in demand (due to inferior goods), increase in price of substitute, decrease in price of complement, increase in population, shift in consumer preference, expectation of higher future prices.
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What factors cause a decrease in demand?
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Decrease in income, decrease in price of substitute, increase in price of complement, decrease in population, shift in consumer taste, expectations of lower future prices.
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6
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What factors cause an increase in supply?
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Lower wages, lower materials or capital, tech advances, government subsidy, expected lower future price, increase in number of producers.
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What factors case a decrease in supply?
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Higher wages, higher materials or capital, higher taxes, expected higher future price, decrease in producers.
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5
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