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21 Cards in this Set
- Front
- Back
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Product Market
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The markets in which firms sell their outputs to households.
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Basic Competitive Model
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Consumers are rational, firms are profit maximizing, and the markets are competitive.
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Opportunity Set
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Group of available options
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Private Property
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Firms and individuals are able to own and use (or sell) factories, land, and buildings.
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Rationing systems
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Different ways of deciding who gets society's scarce resources
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Opportunity Set
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A summary of the choices available to individuals, as defined by budget constraints and time constraints.
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Budget Constraints
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The limitations on consumption of different goods imposed by the fact that households have only a limited amount of money to spend (their budget); the budget constraint defines the opportunity set of individuals when the only constraint that they face is money.
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Time Constraints
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The limitation on consumption of different goods imposed by the fact that households have only a limited amount of time to spend (twenty-four hours a day); The time constraint defines the opportunity set of individuals if the only constraint that they face is time.
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Production possibilities
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The combination of outputs of different goods that an economy can produce with given resources
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Diminishing Returns
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The principle that as one input increases, with other inputs fixed, the resulting increase in output tends to be smaller and smaller.
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Relative Price
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The ratio of any two prices; the relative price of CD's and DVD's is just the ratio of their prices.
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Sunk Costs
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Costs that have been incurred and cannot be recovered.
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Marginal costs
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The additional cost corresponding to an additional unit of output produced.
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Marginal Benefits
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The extra benefits resulting, for instance, from the increased consumption of a commodity.
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Price
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The price of a good or service is what must be given in exchange for the good.
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Market Demand Curve
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The total amount of a particular good or service demanded in the economy at each price; it is calculated by "adding horizontally" the individual demand curves; that is, at any given price, it is the sum of the individual demands.
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Complements
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two goods are complements if an increase in the price of one will reduce the demand for the other.
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Demographic Effects
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Effects that arise from changes in characteristics of the population such as age, birthrates, and location.
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Equilibrium Price
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The price at which demand equals supply.
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Equilibrium quantity
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The quantity demanded and supplied at the equilibrium price, where demand equals supply.
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Market Clearing Price
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The price at which supply equals demand, so there is neither excess supply nor excess demand.
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