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52 Cards in this Set

  • Front
  • Back
economics
Studies the allocation of limited resources in response to unlimited wants.
Scarcity
a situation in which there are too few resources to meet all human wants.
the margin
the cutoff point; decision making at the margin refers to deciding on one more or one less of something.
microeconomics
analyzes the individual components of the economy, such as the choices made by people, firms, and industries.
markets
make possible the voluntary exchange of resources, goods, and services; can take physical, electronic, and other forms.
market prices
serve as signals that guide the allocation of resources.
macroeconomics
analyzes economic aggregates, such as aggregate empolyment, output, growth, and inflation.
command and control
government decrees that direct economic activity.
free markets
the collective decisions of individual buyers and sellers that, taken together, determine what outputs are produced, how those outputs are produced, and who recieves the outputs; free markets depend on private property and free choice.
mixed economies
the mixture of free-market and command-and-control methods of resource allocation that characterize modern economies.
equity
fairness
efficiency
means that resources are used in ways that provide the most value; implies that no one can be mae better off without someone else becoming worse off.
technological efficiency
the greatest quantity of output for given inputs; likewise, for any given output, requires the least-cost production technique.
allocative efficiency
involves choosing the most valuable mix of outputs to produce.
invisible hand
the idea that self-interest and competition promote economic efficencey without any need for action by government.
market failure
situation in which the market outcome is inefficient
normative
having to do with behavioral norms, which are judgements as to what is good or bad.
positive
having to do with what is, was, or will be.
models
simplified versions of reality that emphasize features central to answering the quesitons we ask of them.
opportunity costs
the value of the best alternative opportunity forgone.
land
natural resouces in their natural states.
labor
the human capacity to do work.
human capital
acquired skills and ailities embodied within a person.
capital
anything that is produced in order to increase productivity in the future; includes human capital and physical capital.
entrepreneuership
personal initiative to combine resources in productive ways; involves risk.
technology
possible techniques of production.
production possibilities frontier
a model that shows the various combinations of two goods the economy is capable of producing.
law of increasing cost
the rise in the marginal opportunity cost of producing a good as more of that good is produced.
economic growth
the ability of the economy to produce more or better output.
money
a medium of exchange that removes the need for barter; also a measure of value and a way to store value over time.
barter
the exchange of goods and services directly for one another, without the use of money.
circular flow
a model of the economy that depicts how the flow of money facilitates a counterflow of resources, goods, and services in the input and output markets.
output market
the market where goods and services are bought and sold.
input market
the market where resources are bought and sold
comparative advantage
the ability to produce a good at a lower opportunity cost (other goods forgone) than others could do.
absolute advantage
the ability to produce a good with fewer resources than other producers.
exports
goods and services a country sells to other countires.
imports
goods and services a country buys from other countries.
demand
relates the quantity of a good that consumers would purchase at each of various possible prices, over some period of time, ceteris paribus.
quantity demanded
the quantity that consumers would purchase at a given price.
ceteris paribus
holding all else constant.
law of demand
as price falls, the quantity demanded increases.
normal goods
demand for these goods varies directly with income
inferior goods
demand for these goods varies inversely with income.
substitutes
something that takes the place of something else, such as one breand of cola for another.
complements
goods or services that go well with each other, cuch as cream and coffee.
supply
relates the quantity of a good that will be offered for sale at each of various possible prices, overs some period of time, ceteris paribus.
quantity supplied
the quantity that will be offered for sale at a given price.
law of supply
as price rises, the quantity supplied increases.
market equilibrium
a situation in which there is no tendency for either price or quantity to change.
surplus
the excess of quantity demanded , which occurs when price is above equilibrium.
shortage
the excess of quantity demanded over quantity supplied, which occurs when price is below equilibrium.