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57 Cards in this Set

  • Front
  • Back
Individual choice
Basis of economics- no choice, no economics. The decision of an individual on what to do and what not to do.
Resource
Anything that can be used to produce something else
Scarce
When resources are scarce, there aren't enough available to satisfy all the ways society wants to use them
Opportunity cost
What you must give up in order to get something; the real cost of something
Trade-off
When you compare the costs and benefits of doing something
Marginal decisions
Decisions about whether to do a bit more of less of something; where to spend the next dollar
Marginal analysis
The study of marginal decisions.
Incentive
Anything that offers rewards to people who change their behavior.
Interaction
My choices affect your choices and vice-versa. The results are often much different than the intentions of both parties.
Trade
Provide goods and services and receive goods and services in return. Occurs in a market economy.
Gains from trade
People can get more through trade than they could if they tried to be self-sufficient.
Specialization
Each person specializes in the task that he/she is good at performing. Increases gains in trade.
Equilibrium
A system is in equilibrium when no individual would be better off doing something different.
Efficient
Economy is efficient if it takes all the opportunities to make people better off without making anyone else worse off; no waste.
Equity
Everyone gets his or her fair share. A normative idea; not easily define-able. Often there are trade-offs between equity and efficiency.
Gains from trade
People can get more through trade than they could if they tried to be self-sufficient.
Specialization
Each person specializes in the task that he/she is good at performing. Increases gains in trade.
Equilibrium
A system is in equilibrium when no individual would be better off doing something different.
Efficient
Economy is efficient if it takes all the opportunities to make people better off without making anyone else worse off; no waste.
Equity
Everyone gets his or her fair share. A normative idea; not easily define-able. Often there are trade-offs between equity and efficiency.
Model
A simplified representation of a real life situation. Used to better understand how to deal with real issues.
Other things equal assumption
Used a model; all other relevant factors remain unchanged.
Production possibility frontier
Illustrates the trade-offs in an economy that only produces two goods. Shows the maximum of one product that can be produced with a given quantity of the other.
Factors of production
Resources used to produce goods and services (land, labor, capital, human capital)
Technology
Technical means for producing goods and services; can lessen opportunity costs.
Comparative advantage
One has a comparative advantage in producing something if the opportunity cost for them producing that thing is less than someone else's opportunity cost for producing the same thing. DIFFERENT than absolute advantage.
Absolute advantage
One has an absolute advantage if they can do something better than other people. Eg, Tom can pick 80 coconuts every day and everyone else can only get 50. Does not necessarily mean the opportunity cost is lower.
Barter
When people directly exchange goods and services for goods and services; no money involved.
Circular-flow-diagram
Represents the transactions in an economy by flows around a circle. Factors (land and labor) from households to factor markets to firms (organization that produces goods and services) to markets for goods and services to households
Income distribution
Way in which income is divided among the various owners of factors of production.
Positive economics
Describes the way the economy actually works
Normative economics
Says how the economy ought to work
Forecast
Prediction of the future
Competitive market
There are many buyers and sellers of the same good, none of whom can change the price
Supply and demand model
Model of how a competitive market works
Demand schedule
Shows how much of a good consumers will want to buy at a certain price
Quantity demanded
Amount of a good consumers are willing to buy at a certain price
Demand curve
Graphical representation of the demand schedule. Shows the relationship between quantity demanded and price.
Law of demand
A higher price leads to a lower demand in quantity of a good or service.
Shift of the demand curve
Change in the quantity demanded at any given price, represented by a new position of the demand curve
Movement along the demand curve
Change demanded in the quantity of a good due to the change of the price of that good
Substitute
Goods are substitutes if the rise in the price of one good leads to the increase in demand for the other
Complement
Goods are complements if the rise in the price of one good leads to the decrease in demand for the other good
Normal good
When a rise in income increases the demand for a good it is a normal good
Inferior good
When a rise in income decreases the demand for a good it is inferior (spam)
Individual demand curve
Illustrates the relationship between quantity demanded and price willing to be payed for an individual consumer
Quantity supplied
Amount of goods or services producers are willing to supply at a certain price
Supply schedule
Shows how much of a good producers will supply at different prices
Supply curve
Shows the relationship between quantity supplied and price
Shift in the supply curve
Change in the quantity supplied at any given price.
Movement along the supply curve
Change in the quantity supplied of a good that is a result of a change in the good's price
Input
Good or service that is used to produce another good or service
Individual supply curve
Illustrates the relationship between quantity supplied and price for an individual producer
Equilibrium price
Price at which the amount of good demanded can be supplied and it is the "market clearing" price
Equilibrium quantity
Quantity of good sold at the equilibrium price
Surplus
When quantity supplied is more than the quantity demanded. Occur when the price is above equilibrium level.
Shortage
When the quantity demanded exceeds the quantity supplied. Occur when the price is below the equilibrium price.