Eco 231 - Exam 1 (Vocab)

Front 1

scarcity

Back 1

The limited nature of society's resources.

Front 2

economics

Back 2

The study of how society manages its scarce resources.

Front 3

efficiency

Back 3

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

Front 4

equality

Back 4

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

Front 5

opportunity cost

Back 5

Whatever must be given up to obtain some item.

Front 6

rational people

Back 6

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

Front 7

marginal change

Back 7

A small incremental adjustment to a plan of action.

Front 8

incentive

Back 8

Something that induces a person to act.

Front 9

market economy

Back 9

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

Front 10

property rights

Back 10

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

Front 11

market failure

Back 11

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

Front 12

externality

Back 12

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

Front 13

market power

Back 13

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

Front 14

productivity

Back 14

The quantity of goods and services produced from each unit of labor input.

Front 15

inflation

Back 15

An increase in the overall level of prices in the economy.

Front 16

business cycle

Back 16

Fluctuations in economic activity, such as employment and production.

Front 17

circular-flow diagram

Back 17

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

Front 18

production possibilities frontier

Back 18

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

Front 19

microeconomics

Back 19

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

Front 20

macroeconomics

Back 20

The study of economywide phenomena, including inflation, unemployment, and economic growth.

Front 21

positive statements

Back 21

Claims that attempt to describe the world as it is.

Front 22

normative statements

Back 22

Claims that attempt to prescribe how the world should be.

Front 23

absolute advantage

Back 23

The ability to produce a good using fewer inputs than another producer.

Front 24

opportunity cost

Back 24

Whatever item must be given up to obtain some item.

Front 25

comparative advantage

Back 25

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

Front 26

imports

Back 26

Goods produced abroad and sold domestically.

Front 27

exports

Back 27

Goods produced domestically and sold abroad.

Front 28

market

Back 28

A group of buyers and sellers of a particular good or service.

Front 29

competitive market

Back 29

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

Front 30

quantity demanded

Back 30

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

Front 31

law of demand

Back 31

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

Front 32

demand schedule

Back 32

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

Front 33

demand curve

Back 33

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

Front 34

normal good

Back 34

A good for which, other things equal, an increase in income leads to an increase in demand.

Front 35

inferior good

Back 35

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

Front 36

substitutes

Back 36

Two goods for which an increase in the price of one leads to an increase in the price of another.

Front 37

complements

Back 37

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

Front 38

quantity supplied

Back 38

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

Front 39

law of supply

Back 39

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

Front 40

supply schedule

Back 40

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

Front 41

supply curve

Back 41

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

Front 42

equilibrium

Back 42

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

Front 43

equilibrium price

Back 43

The price that balances quantity supplied and quantity demanded.

Front 44

equilibrium quantity

Back 44

The quantity supplied and the quantity demanded at the equilibrium price.

Front 45

surplus

Back 45

A situation in which quantity supplied is greater than quantity demanded.

Front 46

shortage

Back 46

A situation in which quantity demanded is greater than quantity supplied.

Front 47

law of supply and demand

Back 47

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

Front 48

elasticity

Back 48

A measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants.

Front 49

price elasticity of demand

Back 49

A measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price.

Front 50

total revenue

Back 50

The amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold.

Front 51

income elasticity of demand

Back 51

A measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as the percentage change in quantity demanded divided by the percentage change in income.

Front 52

cross-price elasticity of demand

Back 52

A measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second good.

Front 53

price elasticity of supply

Back 53

A measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in price quantity supplied divided by the percentage change in price.