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