• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

Card Range To Study



Play button


Play button




Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

106 Cards in this Set

  • Front
  • Back
a situation in which unlimited wants exceed the limited resources available to fulfill those wants
study of choices people make to attain their goals given scare resources
3 economic assumptions
people are rational
people respond to incentives
optimal decision are made at the margin (decisions are made that will have incremental benefits)
a group of buyers and sellers of a good ro service and the institution or arrangment by which they come together to grade
marginal analysis
analysis that compares marginal costs and benefits
because of scarcity societies are forced to choose producing one good or service over another
opportunity cost
the highest valued alternative that must be given up to engage in an activity
trade offs force society to answer which questions
what goods and services will be produced?
how will the goods and services be produced?
who will receive the goods and services?
centrally planned economy
an economy in which the government decides how economic resources are allocated
market economy
an economy in which the decision of households and firms interacting drive how economic resources are allocated
mixed economies
an economy in which most economic decisions result from buyer/seller interactions, but the gov plays a significant role in the allocation of resources
productive efficiency
a situation in which a good or service is produced at the lowest possible cost
allocative efficiency
state of the economy in which production is in accordation with consumer preferences. Every good/service is produced to the point where the last unit provides a marginal benefit equal to the marginal cost of production
voluntary exchange
where the buyer and seller of a product are better off by the transaction
the fair distribution of wealth
steps to develop an economic model
decide on the assumptions
formulate a testable hypothesis
use economic data to test the hypothesis
revise the model if it fails
retain the revised model to help answer similar economic questions
positive statement
something that can be tested

ex: an increase in trees will reduce global carbon atm levels
normative statement
something that makes a statement about how things should be

ex: immigration should be allowed
study of micro vs macro
micro studies how households and firms make choices and how they interact in markets

macro studies the economy as a whole including inflation, unemployment, and economic growth
a broad significant improvement to society
percent change
final - original
factors of production
workers, capital, natural resources, and etrepreneaurial ability
Production possibilities frontier
a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology
Is a PPF linear
usually not
1 unit of one product does not necessarily equal 1 unit of another product
points on a PPF line represent
combination of production of two quantities that is attainable
a point that lies inward of the PPF line represents
a scenario that is attainable but inefficient

often happens in scenarios where there has been unemployment or recessions
a point that lies outside of the PFF line represents
an unattainable scenario given the amount of resources
increasing marginal opportunity cost
devoting more resources to one quanity will lead to larger decreases in the production of the other item

the more resources devoted to an activity the smaller the pay to devoting additional resources to the other activity.
what is implied by a shift out in the ppf
resources and technology increased
the act of buying and selling
In a linear scenario, how to you calculate the opportunity cost
opp cost of B is A/B
absolute advantage
the ability of an individual/firm/country to produce more of a good/service than competitors using the same amount of resources
comparative advantage
ability of an individual/firm/country to produce a good or service at a lower opportunity cost than competitors
what is the basis for trade
comparative advantage
product markets
markets for goods and services
factor markets
markets for the factors of production, such as labor, capital, natural resources, etc
factors of production
the inputs used to make goods and services

ex include capital (ex computers and machine tools) and labor
free market
few gov restrictions on how a good can be produced and how a factor of production can be employed
someone who operates a business, bringing together the factors of production to produce good and services
property rights
the rights of individuals/firms have to the use of their property including the right to buy or sell
the difference between capital goods and consumption goods
capital goods are goods that are used to produce more goods/services (such as computers, factories, machines)

consumption goods are final for the consumer
How are resources used related to economic growth in the future
the more resources dedicated, the more economic growth
which leads to more economic growth, dedicating resources to capital or consumptive goods?
capital goods
when the comparative advantage is the same for two companies can there be gains from trade?
one of the benefits of trade
increasing production and consumption
does private property rights include intellectual property?
product market
final market designed for a good/service
who demands and supplies in a product market?
the households demand and firms supply
factor markets
markets for the inputs of production (labor, capital, natural resources)
who supplies and demands in a factor market
individuals supply and firms demand
assumptions of supply and demand
there is no market failure and markets are perfectly competetive
what is a perfectly compteitive market?
A market that meets the conditions of 1) many buyers and sellers 2) all firrms selling identical products, and 3) no barriers to new firms entering the market
in a perfect competitive market what is the economic profit assumption
account profit + opportunity cost = 0
in a market system who decides what goods and services will be produced
what is the main factor that will influence a consumers willingness to buy a product
demand schedules
a table showing the relationship between the price of a product and the quanity of the product demanded
quantity demanded
(often graphed just as quantity) referes to the amount of a good/service that a person is willing and able to purchase at a given price
demand curve
a curve that shows the relationship between the price of a product and the quantity demand (willingness to buy)
market demand
the demand by all consumers for a good/service
what is the law of demand
holding everything constant, certis parabis, when the price of a product falls, the quantity demanded for the product increases and vice versa
Two reasons that the demand curve is downward sloping?
substitution effect and income effect
substitution effect
the change in quantity demand tat results from a change in price, making the good more or less expensive in relation to other substitutes.
income effect
the change in quantity demand resulting from the effect of a change in a good's price on consumers' purchasing power
what causes a shift along the demand curve
change in priice
what causes a shift to a new demand curve
a variable other than price is not held constant:

price of related goods
population and demographics
expected future prices
normal good
a good for which the demand increases as income rises and decrease as income falls

ex: prime rib
inferior good
a good for which the demand increases as income falls and decreases as income rises

ex: tap ramin
how does income affect a demand curve
if affects ones ability and willingness to spend money

during a recession the demand curve for a normal good will shift to the left, but for an inferior good may shift to the right

vice versa
explain how substitutes affect each other demand curves
if the price of X good goes up, its demand will go down, but its substitute, Y, will go up in demand
explain how complements affect each others demand curves
if the price of X good goes up, its demand will go down, but its compliment, Y, will go down in demand as well
how do tastes affect a demand curve
consumers are influenced by advertising campaigns

if an ad makes product X, more desirable, demand will increase
how does population and demographic generally influence a demand curve
in general, more people means more demand

demographics will have different preferences (ex: baby boomers and health care)
how does expected future prices affect a demand curve
if it is expected that price will increase, the demand for a product will increase as well
what is the difference between a change in demand and a change in quantity demanded
a change in demand means a shift in the demand curve

a change in quantity demanded refers to a change that happens along the demand curve as a result of price
quantity supplied
the amount of a good or service that a firm is willing and able to supply at a given price
supply schedule
a table that show the relationship between the price of a product and the quantity of the product supplied
supply curve
a curve that shows the relationship between the price of a product and the quantity of the product supplied
law of supply
Everything else constant, increases in price cause increase in quantity supplied, decreases in price lead to decreases in quantity supplied
what is the slope of a supply curve
what variables shift market supply?
prices of inputs
technological changes
prices of substitutes in production
number of firms in the market
expected future prices
how does price of inputs shift supply?
If the cost of an input rises then the cost of production will increase, making less profit, and supply will decline

vice versa
as the price of a product increases under a supply schedule the quantity supplied...
how does technological changes shift supply?
Positive technolgical change leads to lower costs, increasing profit, increasing supply to the right, and vice versa
technological change
a positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs

po = firm is able to produce more output using the same amount of inputs
how does the price of substitutes in product affect supply
If the price of making one good is not as profitable for a company, then the company will shift from that product and produce its substitute instead. It will increase supply for the alt product and decrease for the original product
how does the number of firms in the market affect supply
When new firms enter it shifts the supply curve to the right

When firms exit the supply curve shifts to the left
how do expected future prices affect supply
if a firm expects that the price of a product will be higher, it will decrease supply and increase it in the future
difference between change in supply and change in quantity supplied
change in supply refers to a shift in the supply curve

change in the quantity supplied refers to a change relating to the products price and is along the curve
market equilibrium
a situation where quantity demanded equals quantity supplied
competitve market equilibrium
a market with many buyers and sellers
assumptions of market equilibrium
that there are enough sellers to be competitive
the way in which firms combing inputs to make a product
a situation in which quantity supplied is greater than quantity demanded
a situation in which quantity demanded is greater than quantity supplied
when new firms enter the market what happens to the supply curve
shift to the right
two single shifts that will increase equilibrium price
increase demand or decrease supply
what happens when you increase D
increase P and increase Q
what happens when you decrease D
decrease P decrease Q
what happens when you decrease S
increase P decrease Q
what happens when you increase S
deacrease P increase Q
what happens increase D and S
P unknown, Q increases
what happens decrease D and S
P unknown, Q decreases
what happens decrease D and increase S
P down, Q unknown
what happens increase D, decrease S
P up, Q unknown
marginal benefit
the amount that a person is willing to pay for a good/service

the more the person consumes, the smaller the marginal benefit
marginal cost
the cost that comes from making one additional good/service