Macro Economics Ch. 1-4

Front 1

Scarcity

Back 1

The limited nature of society's resources

Front 2

Economics

Back 2

The study of how society manages its scarce resources

Front 3

Efficiency

Back 3

The property of society getting the most it can form its scarce resources

Front 4

Equity

Back 4

The property of distributing economic prosperity fairly among the members of society

Front 5

Opportunity cost

Back 5

Whatever must be given up to obtain some item

Front 6

Rational people

Back 6

People who systematically and purposefully do the best they can to achieve their objectives

Front 7

Marginal Changes

Back 7

Small incremental adjustments to a plan of action

Front 8

Incentive

Back 8

Something that induces a person to act

Front 9

Market economy

Back 9

An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

Front 10

Property Rights

Back 10

The ability of an individual to own and exercise control over scarce resources

Front 11

Market failure

Back 11

A situation in which a market left on its own fails to allocate resources efficiently

Front 12

Externality

Back 12

The impact of one person's actions on the well-being of a bystander

Front 13

Market power

Back 13

The ability of a single economic actor (or small group of actors) to have a substantial influence on market prices

Front 14

Productivity

Back 14

The quantity of goods and services produced from each hour of a worker's time

Front 15

Inflation

Back 15

An increase in the overall level of prices in the economy

Front 16

Business cycle

Back 16

Fluctuations in economic activity, such as employment and production

Front 17

Circular-flow diagram

Back 17

A visual model of the economy that shows how dollars flow through markets among households and firms

Front 18

Production possibilities frontier

Back 18

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

Front 19

Microeconomics

Back 19

The study of how households and firms make decisions and how they interact in markets

Front 20

Macroeconomics

Back 20

The study of economy-wide phenomena, including inflation, unemployment, and economic growth

Front 21

Positive statements

Back 21

Claims that attempts to describe the world as it is

Front 22

Normative statements

Back 22

Claims that attempt to prescribe how the world should be

Front 23

Absolute advantage

Back 23

The comparison among producers of a good according to their productivity

Front 24

Opportunity cost

Back 24

Whatever must be given up to obtain some item

Front 25

Comparative advantages

Back 25

The comparison among producers of a good according to their opportunity cost

Front 26

Imports

Back 26

Goods and services produced abroad and sold domestically

Front 27

Exports

Back 27

Goods and services produced domestically and sold abroad

Front 28

Market

Back 28

A group of buyers and sellers of a particular good or service

Front 29

Competitive market

Back 29

A market in which there are many buyers and many sellers so that each has a negligible impact on the market price

Front 30

Quantity demanded

Back 30

The amount of a good that buyers are willing and able to purchase

Front 31

Law of demand

Back 31

The claim that, other things equal, the quantity demanded of a good falls when the price of the good rises

Front 32

Demanded schedule

Back 32

A table that shows the relationship between the price of a good and the quantity demanded

Front 33

Demand curve

Back 33

A graph of the relationship between the price of a good and the quantity demanded

Front 34

Normal Good

Back 34

A good for which, other things equal, an increase in income leads to an increase in demand

Front 35

Inferior Good

Back 35

A good for which, other things equal, an increase in income leads to a decrease in demand

Front 36

Substitutes

Back 36

Two good for which an increase in the price of one leads to an increase in the demand for the other

Front 37

Complements

Back 37

Two goods for which an increase in the price of one leads to a decrease in the demand for the other

Front 38

Quantity supplied

Back 38

The amount of a good that sellers are willing and able to sell

Front 39

Law of supply

Back 39

The claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

Front 40

Supply schedule

Back 40

A table that shows the relationship between the price of a good and the quantity supplied

Front 41

Supply curve

Back 41

A graph of the relationship between the price of a good and the quantity supplied

Front 42

Equilibrium

Back 42

A situation in which the price has reached the level where quantity supplied equals quantity demanded

Front 43

Equilibrium price

Back 43

The price that balances quantity supplied and quantity demanded

Front 44

Equilibrium quantity

Back 44

The quantity supplied and the quantity demanded at the equilibrium price

Front 45

Surplus

Back 45

A situation in which quantity supplied is greater than quantity demanded

Front 46

Shortage

Back 46

A situation in which quantity demanded is greater than quantity supplied

Front 47

Law of supply and demand

Back 47

The claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance