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177 Cards in this Set
- Front
- Back
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scarcity
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the condition that arises because the available resources are insufficient to satisfy wants
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economics
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the social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity
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microeconomics
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the study of the choices that individuals and businesses make, the interaction of these choices, and the influence that governments exert on these choices
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macroeconomics
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the study of the aggregate (or total) effects on the national economy and the global economy of the choices that individuals, businesses, and governments make
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standard of living
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the level of consumption of goods and services that people enjoy, on the average; it is measured by average income per person
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goods and services
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the objects that people value and produce to satisfy human wants
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goods
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physical objects
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services
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work done for people
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unemployment
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the state of being available and willing to work but unable to find suitable work
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cost of living
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the number of dollars it takes to buy the goods and services that achieve a given standard of living
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inflation
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a situation in which the cost of living is rising and the value of money is shrinking
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business cycle
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a periodic but irregular up-and-down movement in production and jobs
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Great Depression
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a period during the 1930s in which the economy experienced its worst ever recession
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economic model
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a description of some aspect of the economic world that includes only those features that are needed for the purpose at hand
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economic theory
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a generalization that summarizes what we understnad about the economic choices that people make and the economic performance of industries and nations based on models that have repeatedly passed the test of corresponding well with real-world data
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ceteris paribus (cet. par.)
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other things remaining the same
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correlation
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the tendency for the values of two variables to move in a predictable and related way
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Post hoc fallacy
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the error of reasoning that a first event causes a second event because the first event occured before the second
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rational choice
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a choice that uses the available resources to most effectively satisfy the wants of the person making the choice
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opportunity cost
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what you must give up to get something
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benefit
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the gain or pleasure that something brings
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margin
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a choice that is made by comparing all the relevant alternatives systematically and incrementally
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marginal cost
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-the cost that arises from a one-unit increase in an activity
-what you must give up to get one more unit or something |
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marginal benefit
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-the benefit that arises from a one-unit increase in activity
-measured by what you are willing to give up to get one more unit of something |
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productivity
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total production per person employed
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scatter diagram
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a graph of the value of one variable against the value of another variable
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time-series graph
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a graph that measures time on the x-axis and the variable or variables in which we are interested on the y-axis
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trend
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a general tendency for the value of a variable to rise or fall
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cross-section graph
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a graph that shows the values of an economic variable for different groups in a population at a point in time
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positive or direct relationship
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a relationship between two variables that move in the same direction
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linear relationship
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a relationship that graphs as a straight line
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negative or inverse relationship
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a relationship between two variables that move in opposite directions
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slope
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the change in the value of the variable measured on the y-axis divided by the change in the value of the variable measured on the x-axis
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consumption goods and services
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goods and services that are bought by individuals and used to provide personal enjoyment and contribute to a person's standard of living
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investment goods
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goods that are bought by businesses to increase their productive resources
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government goods and services
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goods and services that are bought by governments
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exports
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goods and services produced in the United States and sold in other countries
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factors of production
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the productive resources used to produce goods and services-land, labor, capital, and entrepreneurship
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land
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the "gifts of nature," or natural resources, that we use to produce goods and services
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labor
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the work time and work effort that people devote to producing goods and services
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human capital
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the knowledge and skills that people obtain from education, on-the-job training, and work experience
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capital
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tools, instruments, machines, buildings, and other constructions that have been produced in the past and that businesses now use to produce goods and services
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entrepreneurship
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the human resource that organizes labor, land, and capital
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rent
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income paid for the use of land
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wages
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income paid for the services of labor
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interest
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income paid for the use of capital
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profit (or loss)
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income earned by an entrepreneur for running a business
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functional distribution of income
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the percentage distribution of income among the factors of production
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personal distribution of income
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the percentage distribution of income among individual persons
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circular flow model
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a model of the economy that shows the circular flow of expenditures and incomes that result from decision makers' choices, and the way those choices interact to determine what, how, and for whom goods and services are produced
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households
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individuals or groups of people living together as decision-making units
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firms
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the institutions that organize the production of goods and services
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market
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any arrangement that brings buyers and sellers together and enables them to get information and do business with each other
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goods markets
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markets in which goods and services are bought and sold
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factor markets
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markets in which factors of production are bought and sold
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national debt
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the total amount that the government has borrowed to make expenditures that exceed tax revenue-to run a government budget deficit
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production possibilities frontier
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the boundary between combinations of goods and services that can be produced and combinations that cannot be produced, given the available factors of production and the state of technology
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tradeoff
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a constraint of limit to what is possible that forces an exchange or a substitution of one thing for something else
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comparative advantage
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the ability of a person to perform an activity or produce a good or service at a lower opportunity cost than someone else
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absolute advantage
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when one person is more productive than another person in serveral or even all activities
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quantity demanded
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the amount of any good, service, or resource that people are willing and able to buy during a specified period at a specified price
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demand
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the relationship between the quantity demanded and the price of a good when all other influences on buying plans remain the same
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demand schedule
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a lsit of the quantities demanded at each different price when all other influences on buying plans remain the same
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demand curve
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a graph of the relationship between the quantity demanded of a good and its price when all other influences on buying plans remain the same
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change in the quantity demanded
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a change in the quantity of a good that people plan to buy that results from a change in the price of the good
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change in demand
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a change in the quantity that people plan to buy when any influence on buying plans, other than the prices of the good, changes
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substitue
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a good that can be consumed in place of another good
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complement
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a good that is concumed with another good
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normal good
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a good for which the demand increases whem income increases
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inferior good
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a good for which the demand decreases when income increases
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quantity supplied
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the amount of any good, service, or resource that people are willing and able to sell during a specified period at a specified price
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supply
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the reltionship between the quantity supplied and the price of a good when all other influences on selling plans remain the same
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supply schedule
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a list of quantities supplied at each different price when all other influences on selling plans remain the same
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supply curve
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a graph of the relationship between the quantity supplied of a good and its price when all other influences on selling plans remain the same
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change in the quantity supplied
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a change in the quantity of a good that suppliers plan to sell that results from a change in the price of the good
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change in supply
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a change in the quantity that suppliers plan to sell when any influence on selling plans, other than the price of the good, changes
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subsitute in production
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a good that can be produced in place of another good
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complement in production
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a good that is produced along with another good
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market equilibrium
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when the quantity demanded equals the quantity supplied-when buyers' and sellers' plans are consistent
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equilibrium price
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the price at which the quantity demanded equals the quantity supplied
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equilibrium quantity
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the quantity that is bought and sold at the equilibrium price
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surplus or excess supply
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a situation in which the quantity supplied exceeds the quantity demanded
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shortage or excess demand
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a situation in which the quantity demanded exceeds the quantity supplied
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price ceiling or price cap
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the highest price at which it is legal to trade a particular good, service, or factor of production
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rent ceiling
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a law that makes it illegal for landlords to charge a rent that exceeds a set limit-an example of a price ceiling
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price floor
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the lowest price at which it is legal to trade a particular good, service, or factor of production
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minimum wage law
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a governemment regulation that makes hiring labor for less than a specified wage illegal-an example of a price floor
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gross domestic product (GDP)
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the market value of all final goods and services produced within a country in a given time period
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final good or service
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a good or service that is produced for its final user and not as a component of another good or service
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intermediate good or service
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a good or service that is produced by one firm, bought by another firm, and used as a compnent of a final good or service
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consumption expenditure
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the expenditure by households on consumption goods and services
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investment
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the purchase of new capital goods (tools, instruments, machines, buildings, and other constructions) and additions to inventories
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government purchases of goods and services
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the expenditure by all levels of government on goods and services
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net exports of goods and services
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the value of exports of goods and services minus the value of imports of goods and services
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imports of goods and services
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items that households, firms, and governments in the United States buy from the rest of the world
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net domestic product at factor cost
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the sum of the five components of incomes-compensation of employees, net interest, rental income of persons, corporate profits, and proprietors' income
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depreciation
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the decrease in the value of capital that results from its use and from obsolescence-also called capital consumption
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value added
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the value of a firm's production minus the value of the intermediate goods it buys from other firms
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real GDP
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the value of the final goods and services produced in a given year when valued at constant prices
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nominal GDP
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the value of the final goods and services produced in a given year valued at the prices that prevailed in that same year
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self-interest
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the choices that are best for the individual who makes them
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social interest
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the choices that are best for society as a whole
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sunk cost
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a previously incurred and irreversible cost
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incentive
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a reward or a penalty-a "'carrot" or a "stick"-that encourages or discourages an action
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capital goods
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goods that are bought by businesses to increase their productive resources
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export goods and services
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-goods and services that are produced in one country and sold in other countries
-items that firms in the United States sell to the rest of the world |
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production efficiency
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a situation in which we cannot produce more of one good or service without producing less of something else
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economic growth
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the sustained expansion of production possibilities
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substitute
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a good that can be consumed in place of another good
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net taxes
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taxes paid minus cash benefits received from governments
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saving
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the amount of income that is not paid in net taxes or spent on consumption goods and services
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statistical discrepancy
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the discrepancy between the expenditure approach and the income approach estimates of GDP, calculated as the GDP expenditure total minus the GDP income total
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Gross national product (GNP)
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the market value of all the final goods and services produced anywhere in the world in a given time period by the factors of production supplied by the residents of the country
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disposable personal income
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income received by households minus personal income taxes paid
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real GDP per person
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real GDP divided by the population
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chained-dollar real GDP
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the measure of the real GDP calculated by the Bureau of Economic Analysis
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Consumer Price Index
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a measure of the average of the prices paid by urban consumers for a fixed market basket of consumption goods and services
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reference base period
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a period for which the CPI is defined to equal 100. Currently, the reference base period is 1982-1984.
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inflation rate
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the percentage change in the price level from one year to the next
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cost of living index
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a measure of the change in the amount of money that people need to spend to achieve a given standard of living
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GDP deflator
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an average of the current prices of all the goods and services included in GDP expressed as a percentage of base-year prices
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PCE deflator
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an average of the current prices of the goods and services included in the consumption expenditure component of GDP expressed as a percentage of base-year prices
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nominal wage rate
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the average hourly wage rate measured in current dollars
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real wage rate
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the average hourly wage rate measured in dollars of a given reference base year
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nominal interest rate
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the percentage return on a loan, calculated by using dollars
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real interest rate
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the percentage return on a loan, calculated by using purchasing power-the nominal interest rate adjusted for the effects of inflation
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working-age population
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the total number of people aged 16 years and over who are not in jail, hospital, or some other form of institutional care or in the US Armed Forces
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labor force
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the number of people employed plus the number unemployed
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unemployment rate
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the percentage of the people in the labor force who are unemployed
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labor force participation rate
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the percentage of the working-age population who are members of the labor force
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discouraged worker
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a person who does not have a job, is available and willing to work, but has not made specific efforts to find a job within the previous four weeks
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full-time workers
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people who usually work 35 hours or more a week
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part-time workers
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people who usually work less than 35 hours a week
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involuntary part-time workers
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people who work 1 to 34 per week but who are looking for full-time work
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aggregate hours
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the total number of hours worked by all the people employed, both full time and part time, during a year
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frictional unemployment
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the unemployment that arises from normal labor turnover-from people entering and leaving the labor force and from the ongoing creation and destruction of jobs
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structural unemployment
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the unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs
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seasonal unemployment
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the unemployment that arises because of seasonal weather patterns
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cyclical unemployment
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the fluctuating unemployment over the business cycle that increases during a recession and decreases during an expansion
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full employment
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when there is no cyclical unemployment or, equivalently, when all the unemployment is frictional, structural, and seasonal
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natural unemployment rate
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the unemployment rate when the economy is at full unemployment
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potential GDP
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the level of real GDP that the economy would produce if if were at full employment
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economic growth rate
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the annual percentage change of real GDP
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Rule of 70
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the number of years it takes for the level of any variable to double is approximately 70 divided by the annual percentage growth rate of the variable
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labor productivity
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the quantity of real GDP produced by one hour of labor
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economic freedom
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a condition in which people are able to make personal choices, their private property is protected, and they are free to buy and sell in markets
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property rights
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the social arrangements that govern the protection of private property
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law of market forces
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when there is a shortage, the price rises; and when there is a surplus, the price falls
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law of supply
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other things remaining the same, if the price of a good rises, the quantity supplied of that good increases; and if the price of a good falls, the quantity supplied of that good decreases
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law of demand
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other things remaining the same, if the price of a good rises, the quantity demanded of that good decreases; and if the price of a good falls, the quantity demanded of that good increases
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chained-dollar real GDP
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the measure of real GDP calculated by the Bureau of Economic Analysis
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hyperinflation
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an inflation rate that exceeds 50% a month
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job losers
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people who are laid off from their jobs
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job leavers
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people who voluntarily quit their jobs
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entrants and reentrants
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people who have just left school or who are now looking for a job after a period out of the labor force
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hires
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people who have been unemployed and have started new jobs
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recalls
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people who have been temporarily laid off and have started work again
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withdrawals
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people who have been unemployed and have decided to stop looking for jobs
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diminishing returns
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the tendency for each additional hour of labor employed to produce successively smaller additional amounts of real GDP
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production function
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a relationship that shows the maximum quantity of real GDP that can be produced as the quantity of labor employed changes and all other influences on production remain the same
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quantity of labor demanded
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is the total labor hours that all the firms in the economy plan to hire during a given time period at a given real wage rate
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demand for labor
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the relationship between the quantity of labor demanded and real wage rate when all other influences on firms' hiring plans remain the same
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quantity of labor supplied
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the number of labor hours that all the households in the economy plan to work during a given time period and at a given real wage rate
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supply of labor
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the relationship between the quantity of labor supplied and the real wage rate when all other influences on work plans remain the same
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job search
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the activity of looking for an acceptable vacant job
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job rationing
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a situation that arises when the real wage rate is above the equilibrium level
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efficiency wage
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a real wage rate that is set above the full-employment equilibrium wage rate to induce greater work effort
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union wage
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a wage rate that results from collective bargaining between a labor union and a firm
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