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