Microeconomics 103 - Eau Claire

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Scarcity

Back 1

The limited nature of society's resources

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economics

Back 2

the study of how society manages its scarce resources

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efficiency

Back 3

the property of society getting the most it can from its scarce resources

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equality

Back 4

the property of distributing economic prosperity uniformly among the members of society

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opportunity cost

Back 5

whatever must be given to obtain some item

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rational people

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people who systematically and purposefully do the best they can to achieve their objectives

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marginal change

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a small incremental adjustment to a plan of action

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incentive

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something that induces a person to act

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market economy

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an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

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property rights

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the ability of an individual to own and exercise control over scarce resources

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market failure

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a situation in which a market left on its own fails to allocate resources efficiently

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externality

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the impact of one person's actions on the well-being of a bystander

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market power

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the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices

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productivity

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the quality of goods and services produced from each unit of labor input

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inflation

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an increase in the overall level of prices in the economy

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circular-flow diagram

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a visual model of the economy that shows how dollars flow through markets among households and firms

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production possibilities frontier

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a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production

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microeconomics

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the study of how households and firms make decisions and how they interact in markets

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macroeconomics

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the study of economywide phenomena, including inflation, unemployment, and economic growth

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positive statements

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claims that attempt to describe the world as it is

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normative statements

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claims that attempts to prescribe how the world should be

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absolute advantage

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the ability to produce a good using fewer inputs that another producer

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opportunity cost

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whatever must be given to obtain some item

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comparative advantage

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the ability to produce a good at a lower opportunity cost than another producer

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imports

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goods produced abroad and sold domestically

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exports

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goods produced domestically and sold abroad

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Market

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a group of buyers and sellers of a parcticular good or service

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competitive market

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a market in which there are many buyers and many sellers so that each has a negligible impact on the market place

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quantity demanded

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the amount of a good that buyers are willing and able to purchase

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law of demand

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the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises

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demand schedule

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a table that shows the relationship between price of a good and quantity demanded

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demand curve

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a graph of the relationship between price of a good and quantity demanded

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normal good

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a good for which, other things equal, and increase in income leads to an increase in demand

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inferior good

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a good for which, other things equal, an increase in income leads to a decrease in demand

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substitutes

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two goods for which an increase in the price of one leads to and increase in the demand for the otther

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complements

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two goods for which an increase in the price of one leads to a decrease in the demand for the other

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quantity supplied

Back 37

the amount of a good that sellers are willing and able to sell

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law of supply

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the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

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supply schedule

Back 39

a table that shows the relationship between the price of a good and quantity supplied

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supply curve

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a graph of the relationship between the price of a good and the quantity supplied

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equalibrium

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a situation in which the market price has reached the level at which quantity supplied equals quantity demanded

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equilibrium price

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the price that balances quantity supplied and quantity demanded

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equilibrium quantity

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the quantity supplied and quantity demanded at the equilibrium price

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surplus

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a situation in which quantity supplied is greater than quantity demanded

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shortage

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a situation in which quantity demanded is greater than quantity supplied

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law of supply and demand

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the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance