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53 Cards in this Set

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Scarcity
The situation in which unlimited wants exceed the limited resources available to fulfill those wants.
Economics
The study of the choices people make to attain their goals, given their scarce resources.
Economic model
Simplified versions of reality to analyze real world economic situations.
Market
A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.
Marginal analysis
Analysis that involves comparing marginal benefits and marginal costs
Trade off
The idea that because of scarcity, producing more of one good or services means producing less of another good or service.
Centrally planned economy
An economy in which the government decides how economic resources will be allocated.
Market economy
An economy in which the decisions of households and firms interacting in markets allocate economic resources.
Mixed economy
an economy in which most economic decisions result from the interaction of buyers and seller in markets, but in which the government plays a significant role in the allocation of resources.
Productive efficiency
The situation in which a good or service is produced at the lowest possible cost.
Allocative efficiency
A state of the economy in which production reflects consumer preferences; in particular, every good or services is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.
Voluntary exchange
The situation that occurs in markets when both te buyer and seller of a product are made better off by the transaction.
Equity
The fair distribution of economic benefits
Economic variable
Something measurable that can have different values, such as the wages of software programmers
Positive analysis
Analysis concerned with what is
Normative analysis
Analysis concerned with what ought to be
Microeconomics
The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices
Macroeconomics
The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth
Production possibilities frontier
A curve showing the maximum attainable combinations of two products that may be produced with available resources
Opportunity cose
The highest-valued alternative that must be given up to engage in an activity
Economic growth
The ability of the economy to produce increasing quantities of good and services
Trade
The act of buying or selling
Absolute advantage
The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources
Comparative advantage
The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers
Market
A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade
Product markets
Markets for goods-such as computers-and services-such as medical treatment.
Factor markets
Markets for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability
Circular-flow design
A model that illustrates how participants in markets are linked
Free market
A market with few government restrictions on how a good or service can be produced or sold, or on how a factor of production can be employed
Entrepreneur
Someone who operates a business, bringing together the factor of production-labor, capital, and natural resources-to produce goods and services
Property rights
The rights individuals or firms have the exclusive use of their property, including the right to buy or sell it
Quantity demanded
The amount of a good or service that a consumer is willing and able to purchase at a give price
Demand schedule
A table showing the relationship between the price of a product and the quantity of the product demanded
Demand curve
A curve that shows the relationship between the price of a product and the quantity of the product demanded
Market demand
The demand by all the consumers of a given good or service
Law of demand
Holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease
Substitution effect
The change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods that are substitutes
Income effect
The change in the quantity demanded of a good that results from the effect of a change in the good's price on consumer purchasing power
Ceteris paribus ("All else equal")
The requirement that when analyzing the relationship between two variable-such as price and quantity demanded-other variables must be held constant
Substitutes
Goods and services that can be used for the same purpose
Complements
Goods that are used together
Normal good
A good for which the demand increases as income rises and decreases as income falls
Inferior good
A good for which the demand increases as income falls, and decreases as income rises
Demographics
The characteristics of a population with respect to age, race, and gender
Quantity supplied
The amount of a good or service that a firm is willing and able to supply at a given price
Supply schedule
A table that shows the relationship between the price of a product and the quantity of the product supplied
Supply curve
A curve that shows the relationship between the price of a product and the quantity of the product supplied
Law of supply
Holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied
Technological change
A positive or negative change in the ability of a firm to produce a given level of output with a given amount of inputs
Market equilibrium
A situation in which quantity demanded equals quantity supplied
Competitive market equilibrium
A market equilibrium with many buyers and many sellers
Surplus
A situation in which the quantity supplied is greater than the quantity demanded
Shortage
A situation in which the quantity demanded is greater than the quantity supplied