Midterm Definitions

Front 1

Economize

Back 1

To use limited resources efficiently in production

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Economics

Back 2

The study of the way society makes decisions about the use of scarce resources.

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Economy

Back 3

A self-sustaining system in which many independent transactions in the society create distinct flows of money and products.

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Effective

Back 4

A particular use of resources that achieves a desired end, such as consumption

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Efficient

Back 5

The use of a bare minimum of resources to achieve a desired end, such as consumption

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Opportunity cost

Back 6

The opportunity cost is what could have been done with the resources when a decision is made about their use. The opportunity cost is the opportunity lost (the second most preferable option).

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Positive Economics (Analytical)

Back 7

“What is?” The branch of economics that deals with facts and direct observation of the world.

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Normative Economics

Back 8

“What ought to be?” The branch of economics that deals with value judgements about economic subjects rather than facts and observations.

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Scientific method:

Back 9

Used to make discoveries in sciences. 4 steps:

Observation

Data collection

Explanation

Verification.

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Production Possibility Curve (PPC)

Back 10

A graphical representation of the production choices facing and economy

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Trade-offs

Back 11

The sacrifice of one resource or production choice for another.

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Consumer goods

Back 12

Those goods or services that an economy produces to satisfy human needs

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Productive resources

Back 13

anything that can be used to manufacture goods or services.

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Capital goods:

Back 14

Goods such as tools or machinery used to produce consumer goods.

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Relative cost

Back 15

The cost of producing one item, A, expressed in terms of the numbers of another item, B, which must be given up in order produce A (i.e. A’s opportunity cost).

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Law of increasing relative cost:

Back 16

The increase in the relative cost of producing more of item A, measured by the numbers of another item, B, that could be produced with the same resources.

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Law of diminishing returns

Back 17

Decrease in the marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, while the amounts of all other factors of production stay constant.

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Frontier

Back 18

The curve on a production possibilities graph representing the maximum numbers of two items that can be produced with a given amount of resources.

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Output

Back 19

The products produced by using resources or inputs such as land, labor, or capital.

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Law of increasing returns to scale

Back 20

The increase in the rate of extra outputs produced when all inputs used in production are increased and no inputs are held constant.

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Input

Back 21

Productive resources such as land, labor, or capital used to produce an output.

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Factors of production

Back 22

Resources (such as land, labour, and capital) that are used to produce goods and services.

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Entrepreneurship

Back 23

The contribution made by an owner, manager, or innovator who organizes land, labor, and capital to produce goods and services.

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Capital

Back 24

A factor of production that refers to machinery, factories, warehouses, and equipment used to produce goods and services.

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Real Capital

Back 25

A more precise term than capital for the machinery, factories, warehouses, and equipment used to produce goods and services, as distinct from financial capital.

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Money Capital

Back 26

The funds used to acquire real capital.

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Productivity

Back 27

A firm's ability to maximize output from the resources available, usually measured as the firm's output per worker.

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Tangible resources

Back 28

-Land

-Labor

-Capital

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Intangible resources

Back 29

-Entrepreneurship

-Knowledge

-Environment for enterprise.

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Economic system

Back 30

The laws, institutions, and common practices that help a nation determine how to use its resources to satisfy as many of its people's needs and wants as possible.

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Traditional economy

Back 31

An economic system in which production decisions are determined by the practices of the past. Bartering

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Barter

Back 32

The trading of goods and services without the use of a monetary system; such transactions are common in traditional economies.

Front 33

Mixed Economy

Back 33

An economic system, such as Canada's, that contain elements of free market, command, and traditional economic systems.

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Command Economy

Back 34

An economic system in which productions decisions are made by central planners.

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Free Market Economy

Back 35

An economic system in which production decisions are made by the actions of buyers and sellers in the market place.

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Equity

Back 36

Fair and just distribution of income within an economy.

Front 37

Efficiency

Back 37

A firm's ability to produce at the lowest possible cost, measured by either its cost per unit or its labor cost.

Front 38

Self Interest

Back 38

Each individual's strongest drive is to better his or her condition.

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Division of Labour

Back 39

The specialization of workers in a complex production process, leading to greater efficiency.

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Market

Back 40

A place for commerce; network of buyers or sellers. also, the demand for a product; a price determination process.

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Demand

Back 41

Quantity of a good or service that buyers will purchase at various prices during a given period of time

Front 42

Law of demand

Back 42

Quantity demanded of a product varies inversely with its price, as long as other things do not change.

Front 43

Demand schedule

Back 43

A table showing the quantity demanded of a product at particular prices.

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Ceteris paribus

Back 44

Latin for “other things being equal” or “as long as other things do not change”; an assumption made when economists want to understand the cause-and-effect relationship between any two factors and want other factors affecting that relationship to be held constant.

Front 45

Demand curve

Back 45

A straight line or curve on the graph illustrating the demand schedule for a product.

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Market demand schedule

Back 46

The sum total of all the consumer demands for good or service.

Front 47

Shifts in the demand curve and its impact on price and quantity produced

Back 47

If the demand curve shifts to the left, there is less supplied, if it shifts right, there will be more supplied.

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Equilibrium price

Back 48

A price set by the interaction of demand and supply in which the absence of surpluses or shortages in the market means there is no tendency for the price to change.

Front 49

Consumer expectations

Back 49

What consumers believe will happen to the price of a product in the future; such beliefs have the effect of changing consumer demand for the product in the present.

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Quantity demanded

Back 50

The amount of a product people are willing to buy at a certain price.

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The difference between demand and quantity demanded

Back 51

Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price

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Demand relationship.

Back 52

Relationship between price and quantity demanded. Price is a reflection of demand

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Supply

Back 53

The quantities that sellers will offer for sale at various prices during a given period of time

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Law of supply

Back 54

Quantity supplied of a product will increase if price increases and fall as price falls, as long as other things do not change.

Front 55

Supply Schedule:

Back 55

A table showing the quantities of a product supplies at particular prices.Shifts in supply and its impact on quantity and price:

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Substitute goods

Back 56

Goods that are similar to other goods and serve as an alternative if the price of the latter goods rises.

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Complement goods

Back 57

Goods that are sold together along with other goods e.g gas and cars.

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Pure/Perfect competition

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-Sellers (selling exactly into the same marker) and many buyers,

-No barriers to entry into the market for new firms, and perfect knowledge of prices (so there are no price differences and no individual can influence them)

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Supply demanded

Back 59

Amount of a certain good producers are willing to supply when receiving a certain price.

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The difference between supply and supply demanded

Back 60

Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price.

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Supply Relationship

Back 61

The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. Price, therefore, is a reflection of supply.