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30 Cards in this Set
- Front
- Back
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Economics |
The study of how society allocates scarce resources |
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Advantages of division of labour |
1. Specialize in what their good at. 2. Learning by doing 3. Economies of scale |
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Market |
An institution where buyers and sellers come together. |
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Market Economy |
-private ownership -allocation of resources depends on prices established in markets |
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Command economy and traditional economy |
Back (Definition) |
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Different types of consumer models |
-more is better -diminishing Marginal Utility |
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What is more is better? |
An assumption that a consumer generally prefers more of a good. |
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What is more is better? |
An assumption that a consumer generally prefers more of a good. |
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Diminishing marginal utility |
Gains to utility from the first unit are larger than the gains from the subsequent unit. |
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Opportunity cost |
How much it cost or how much must be given to obtain a good. |
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Production possibility frontier |
Combination of goods and services a country can produce with full employment of their resources. |
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Production Efficiency |
Cannot produce another unit of one good without giving up units of another. |
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Allocative efficiency |
Combination that maximizes social welfare |
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Absolute advantage |
Ability of the producer to produce the same amount of goods using fewer resources. |
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Economies of scale |
Average cost per unit falls as a firm produces more. |
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Demand |
Maximum willingness to pay for the next available unit |
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Market economy |
Resources allocated among households and firms, little or no government interference. |
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Market Demand |
The horizontal summation of each individual's quantity demanded at every price. |
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Demand shifters |
-income -related goods -compliments -taste and preferences -number of buyers -price expectations |
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Demand increases |
Curve shifts right |
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Demand decreases |
Curve shifts left |
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Supply |
All those willing and able to produce /sell/supply the good/service make up supply. |
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Quantity supplied |
The amount of a good or service that sellers are willing and able to supply at various prices. |
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Law of supply |
Price and quantity supplied are positively related |
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Market equilibrium |
QS=Q |
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Buyers are unhappy when |
P is not equal to P equilibrium |
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Supply shifters |
-technology -number of firms -price of input |
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Supply increases |
Curve shifts down |
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Supply decreases |
Supply curve shifts up |
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Consumer surplus and producer surplus |
Bam |
