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60 Cards in this Set

  • Front
  • Back
scarcity
the limited nature of society's resources
economics
the study of how society manages its scarce resources
efficiency
the property of society getting the most it can from its scarce resources
equity
the property of distributing economic prosperity fairly among members of society
opportunity cost
whatever must be given up to obtain some item
rational people
people who systematically and purposefully do the best they can to achieve their objectives
marginal changes
small incremental adjustments to a plan of action
incentive
something that involves a person to act
sunk cost
cost already spent, can't be returned, irrelevant
property rights
the ability of an individual to own and exercise control over scarce resources
market economy
an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
market failure
a situation in which a market left of its own fails to allocate its own resources efficiently
externality
the impact of one person's actions on the well-being of a bystander
productivity
quantity of goods and services produces from each hour of a worker's time
inflation
an increase in the overall level of prices in the economy
business cycle
the irregular and largely unpredictable fluctuations in economic activity as measured by the production of goods and services or the number of people employed
circular flow diagram
a visual model of the economy that shows how dollars flow through markets among households and firms
production possibilities frontier
a graph that shows the combinations of output that the economy can possibly
produce a given the available factors of production and the available production technology
microeconomics
the study of how households and firms make decisions and how they interact in markets
macroeconomics
the study of how economy wide phenomena including inflation, unemployment and economic growth
positive statements
claims that attempt to describe the world as it is
normative statements
claims that attempt to prescribe how the world should be
absolute advantage
the comparison mong producers of a good according to their productivity
comparative advantage
the comparison among producers of a good according to their opportunity cost
market
a group of buyers and sellers of a particular good or service
competitive market
a market in which there are many buyers and many sellers so that each has a negligible impact on the market price
quantity demanded
the amount of good that buyers are willing and able to purchase
demand schedule
a table that shows the relationship between the price of a good and the quantity demanded
demand curve
a graph of the relationship between the price of a good and the quantity demanded
market demand
the sum of all the individual demands for particular good or service
normal good
a good for which, other things equal, an increase in income leads to an increase in demand
inferior good
a good for which, other things equal, an increase in income leads to a decrease in demand
substitutes
two goods for which an increase in price of one leads to an increase in the demand for the other
complememts
two goods for which an increase in the price of one leads to a decrease in the demand for the other
quantity supplied
the amount of a good that sellers are willing and able to sell
Law of Supply
the claim that , other things equal, the quantity supplied of a good rises when the price of a good rises
supply schedule
a table that shows the relationship between the price of a good and the quantity supplied
supply curve
a graph of the relationship between the price of a good and the quantity supplied
market supply
the sum of supplies of all sellers
equilibrium
a situation in which the price has reached the level where quantity supplied equals quantity demanded
equilibrium price
the price that balances quantity supplied and the quantity demanded
equilibrium quantity
the quantity supplied and the quantity demanded at the equilibrium price
surplus
quantity supplied is greater than quantity demanded
shortage
quantity demanded is greater than quantity supplied
Law of Supply and Demand
the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded into balance
elasticity
a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants
price elasticity of demand
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 changed in quantity demanded divided by the percentage change in price
total revenue (in a market)
the amount paid by buyers and received by sellers of a good computed as the price of the good times the quantity sold
income elasticity of demand
a measure of how ,ice the quantity demanded of a good responds to a change in consumer's income
cross-posted elasticity of demand
a measure of how much the quantity demanded of one good responds to a change in the price of another good
price elasticity of supply
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 quantity supplied divided by the percentage change in price
price ceiling
a legal maximum of the price at which a good can be sold
price floor
a legal minimum on the price at which a good can be sold
tax incidence
the manner in which the burden of a tax is shared among participants in a market
welfare economics
the study of how the allocation of resources affects economic well-being
willingness to pay
the maximum amount that a buyer will pay for a good
consumer surplus
a buyer's willingness to pay minus the amount the buyer actually pays
cost
the value of everything a seller must give up to produce a good (producer's opportunity cost)
producer surplus
the amount a seller is paid for a good minus the seller's cost
deadweight loss
the fall in the total surplus that results when a tax distorts a market outcome