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21 Cards in this Set

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