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20 Cards in this Set
- Front
- Back
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What is LRAS and what does it stand for?
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Long Run Aggregate Supply, LRAS is the natural level of GDP. It is shown vertical on a graph. When LRAS shifts, SRAS (Short Run Aggregate Supply) will follow .
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What are Tangible Assets?
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Real Estate, Equipment, and Cash (physical assets)
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What are Intangible Assets?
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Patents, Goodwill, and Trademarks (lack physical substance)
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What is the substitution effect?
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Economic rule stating that if two items satisfy the same need and the price of one rises, people will buy the other.
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What is the equilibrium price?
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The price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time.
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What is Excess Supply?
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When quantity supplied is more than quantity demanded. The formula for excess supply is: Supply - Demand = Excess Supply
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What is Reservation price?
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Maximum price that a customer is willing to pay for a good
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What is Buyer's surplus?
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The difference between a buyer's reservation price (the price they want to pay) and the actual price paid for a good or service
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What is Seller's surplus?
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The difference between the price received by the seller and the seller's reservation price
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What is Total surplus?
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The difference between the buyer's reservation price and the seller's reservation price. Consumer surplus + Producer surplus
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What is a Free market economic system?
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A market with unrestricted trading of goods, where the prices of goods are determined by supply and demand.
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What is a Traditional economic system?
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In a traditional economic system, the availability of resources is based on inheritance. Goods are only produced for consumption and surpluses do not occur. This type of economy is normally found in South American, Asian, and African countries.
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What is a Command economic system?
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An economic system in which all factors of production are owned and controlled by the government. Often referred to as a centrally planned economic system. Example: Former Soviet Union.
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What is a Mixed market economic system?
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Combines pure market and command.
Example: Japan |
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What is the Law of Diminishing Marginal Utility?
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A law stating that as a person consumes additional units of a good, eventually the utility gained from each additional unit of the good decreases.
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What is the Law of Demand?
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A law stating that as the price of a product increases the demand of that product decreases, while if the price of a product decreases the demand for that product increases.
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What is the Law of Supply?
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The law that states that as the price of any good or service increases, the quantity of that good or service will increase and vice versa.
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What is Liquidity?
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The ease with which an asset can be converted to currency.
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Define Macroeconomics
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The part of economics study that looks at the operation of a nation's economy as a whole
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What is an Asset?
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(n) something of value; a resource; an advantage
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