Macroeconomics- Mcconnell/brue- Ch1-3

Front 1

economics

Back 1

efficiently using scarce resources to achieve maximum satisfaction of economic wants

Front 2

utility

Back 2

the want-satisfying power of a good or service

Front 3

features of economic perspective

Back 3

1. scarcity requires choice and all choice entails a cost

2. views people as rational decision makers who make decisions based on their self-interests

3. how marginal cost compares with marginal benefits

Front 4

marginal analysis

Back 4

comparison of marginal (extra or additional)benefits and marginal costs

Front 5

scientific method

Back 5

observation of facts, formulating and testing the hypothesis to obtain theories, principles and laws

Front 6

theoretical economics

Back 6

gathering and analysis of relevant facts to derive economic principles

Front 7

principles

Back 7

predictions of the outcomes of certain actions or events

Front 8

generalizations

Back 8

relating theories, principles, and laws to economics

Front 9

"other-things-equal" assumption (ceteris paribus)

Back 9

used to limit the influence of other factors when making a generalization

Front 10

policy economics

Back 10

using economic principles to solve economic problems

Front 11

three steps in creating economic policy

Back 11

1. stating the goal

2. considering the options

3. evaluating the results

Front 12

8 major economic goals

Back 12

1. economic growth

2. full employment

3. economic efficiency

4. price-level stability

5. economic freedom

6. equitable distribution of income

7. economic security

8. balance of trade

Front 13

tradeoffs

Back 13

making a sacrifice in order to achieve an economic goal

Front 14

macroeconomics

Back 14

analysis of the government overall (ex. govt, households business)

Front 15

microeconomics

Back 15

analysis of econ at a smaller level (details)

Front 16

aggregate

Back 16

collection of specific economic units treated as one

Front 17

positive economics

Back 17

analysis of facts and developing theories... looks at what is

Front 18

normative economics

Back 18

answers policy questions... looks at what ought to be

Front 19

fallacy of composition

Back 19

making a false generalization

Front 20

"after this, therefore because of this" fallacy (post hoc)

Back 20

falsely assuming that one thing happend as a result of another

Front 21

vertical axis

Back 21

where the dependent variable is

Front 22

horizontal axis

Back 22

where the independent variable is

Front 23

direct relationship

Back 23

positive relationship (increase in one variable, increase in the other variable)

Front 24

inverse relationship

Back 24

negative relationship
(increase in one variable, decrease in the other variable)

Front 25

dependent variable

Back 25

changes because of change in another variable

Front 26

independent variable

Back 26

produces change in the dependent variable

Front 27

slope of a straight line

Back 27

positive slope- direct relationship

negative slope- inverse relationship

Front 28

vertical intercept

Back 28

where line intersepts the vertical side of the graph

Front 29

nonlinear curve

Back 29

slope changes throughout

Front 30

economizing problem

Back 30

how to best use limited productive resources to satisfy wants

Front 31

economic resources

Back 31

all resources that go into the prodcution of goods and serrvices

property- land, raw material, capital

human- labor, entrepeneurial ability, etc.

Front 32

land

Back 32

all "gifts of nature"

Front 33

capital

Back 33

tools, machinery, equipment, factory

Front 34

investment

Back 34

process if producing/purchasing capital

Front 35

labor

Back 35

physical and mental services of humans

Front 36

entreprenurial ability

Back 36

make strategic business decisions

Front 37

factors of production

Back 37

combination of land, labor, capital and e.a. to form goods/services

Front 38

full employment

Back 38

use of all available resources

Front 39

full production

Back 39

all employed resources must provide maximum satisifaction of economy

Front 40

productive efficiency

Back 40

production of any mix of goods or services in the least costly way

Front 41

allocative efficiency

Back 41

resources are devoted to the production of goods and services society values most

Front 42

consumer goods

Back 42

products that satisfy our wants directly (i.e. pizza)

Front 43

capital goods

Back 43

products that satisfy our wants indirectly (i.e. robots)

Front 44

production possibibilites table

Back 44

alternative combos of 2 products that can be produced with a specific set of resources (pizza and robots)

Front 45

circular flow model

Back 45

clarifies the relationships between households and businesses

Front 46

opportunity cost

Back 46

amount of other products that must be sacrificed to obtain 1 unit of a specific good

Front 47

law of increasing opportunity costs

Back 47

the more of a product produced, the greater its oppurtunity cost

Front 48

economic growth

Back 48

ability to produce a larger total output

1. increases in supply of resources

2. improvements in resource quality

3. technological advances

Front 49

economic system

Back 49

a particular set of institutional arrangements and a coordinating mechanism ot respond to the economic problem

Front 50

market system

Back 50

use of markets/prices to coordinate and direct economic activity (capitalism)

Front 51

capitalism

Back 51

limited government influence in the economy

Front 52

command system

Back 52

government owns economic decisions and resources (communism and socialism)

Front 53

resource market

Back 53

place where resources or the services of resource suppliers are bought/sold

Front 54

product market

Back 54

place where goods and services produced by businesses are bought/sold

Front 55

market

Back 55

brings together buyers and sellers of goods, services and resources

Front 56

demand

Back 56

shows what consumers are willing and able to purchase

Front 57

demand schedule

Back 57

list of prices and quantity demanded (table)

Front 58

law of demand

Back 58

as prices fall, demand rises and prices rise, demand falls

Front 59

diminishing marginal utility

Back 59

less satisfaction is derived from each successive product purchased

Front 60

income effect

Back 60

lower price increases the buyers money income, which enables the buyer to purchase more of the product than he would before

Front 61

substitution effect

Back 61

people buy whats a better deal (i.e. if chicken is on sale, people will buy it over beef or pork)

Front 62

demand curve

Back 62

graphical display of how people buy more of a product as its price falls

Front 63

determinants of demand

Back 63

factors that affect purchases on a demand curve

Front 64

normal good

Back 64

product whose demand varies with money income (superior goods) (as income increases, more of product is purchased)

Front 65

inferior good

Back 65

demand of goods varies inversely with money income (as income increases, less of product is purchased)

Front 66

substitute goods

Back 66

a good that can be used in place of another good (chicken and beef)

Front 67

complementary goods

Back 67

a good that is used together with another good (gas and motor oil)

Front 68

change in demand

Back 68

shift of the demand curve to the right (increase in demand) or to the left (decrease in demand)

Front 69

change in quantity demanded

Back 69

movement from one point to another point

Front 70

quantity demanded

Back 70

amount of a good or service the buyers desire to purchase at a certain price

Front 71

individual demand

Back 71

demand schedule or curve of a single buyer

Front 72

total or market demand

Back 72

demand schedule or curve of all buyers of a good or service

Front 73

supply

Back 73

schedule or curve that shows what sellers are willing and able to make available for sale

Front 74

supply schedule

Back 74

table of supply prices and periods of time

Front 75

law of supply

Back 75

increase in price of a product will increase the quantity of it supplied. decrease in price of a product will decrease the quantity of it supplied

Front 76

quantity supplied

Back 76

amount of a good or service that producers offer to sell at a particular price during some period

Front 77

supply curve

Back 77

curve illustrating supply

Front 78

determinants of supply

Back 78

factors other than price that determine the quantities supplied of a good or service

Front 79

change in supply

Back 79

shift in curve to the right (increase in supply), shift in curve to the left (decrease in supply)

Front 80

change in quantity supplied

Back 80

movement from one point to another

Front 81

surplus

Back 81

amount by which the quantity supplied of a product exceeds the quantity demanded of a product at an above equilibrium price

Front 82

shortage

Back 82

amount in which the quantity demanded exceeds the quantity supplied at a particular below equilibrium price

Front 83

equilibrium price

Back 83

price where quantity supplied and demanded are equal

Front 84

equilibrium quantity

Back 84

quantity demanded and supplied at the equilibrium price in a competitive market, profit maximizing output of a firm

Front 85

rationing function of prices

Back 85

change prices so theres no shortage or surplus

Front 86

price ceiling

Back 86

maximum legal price something can be sold for (creates shortage)

Front 87

price floor

Back 87

lowest legal price something is allowed to be sold for (creates a surplus)