Macroeconomics Chapter 1-3

Front 1

economics

Back 1

the social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

Front 2

economic perspective

Back 2

economic way of thinking

Front 3

opportunity cost

Back 3

to obtain more of one thing, society forgoes the opportunity of getting the next best thing

Front 4

utility

Back 4

the pleasure, happiness, or satisfaction obtained from a service/good

Front 5

marginal analysis

Back 5

the comparisons of marginal benefits and marginal costs, usually decision making

Front 6

economic principle

Back 6

a statement about economic behavior or the economy that enables prediction of probable effect of certain actions

Front 7

scientific method

Back 7

the procedure for the systematic pursuit of knowledge including observation of facts and the formulation and testing of hypothesis to obtain theories, principles, and laws

Front 8

other-thing-equal assumption

Back 8

the assumption that factors other than those being considered are held constant; ceteris paribus

Front 9

macroeconomics

Back 9

the part of economics concerned with the economy as a whole; with such major aggregates as the household, business and government sectors, and with measure of total economy

Front 10

aggregate

Back 10

a collection of economic units treated as if they were one. all individual goods and services combined into a prize level or all units of output are aggregated into GDP

Front 11

microeconomics

Back 11

concerned with decision making by individual units such as households, firms, or industries and with specific markets, specific goods, and specific prices

Front 12

positive economics

Back 12

the analysis of factor data to establish scientific generalizations about economic behavior

Front 13

normative economics

Back 13

economics involving value judgment about what the economy should be like; focuses on goals and policies

Front 14

economizing problem

Back 14

the need to make choices because economic wants exceed economic needs

Front 15

budget line

Back 15

a schedule or curve that shows various combinations of two products a consumer can purchase with specific money income

Front 16

economic resources

Back 16

all natural, human, and manufactured resources that go into the production of goods and services

Front 17

land

Back 17

all natural resources used in the production process, such as arable land, forests, mineral and oil deposits, and water resources

Front 18

labor

Back 18

physical and mental talents of individuals used in producing goods and services

Front 19

capital

Back 19

all manufactured aids used in producing consumer goods and services

Front 20

investment

Back 20

the purchase of capital goods

Front 21

entrepreneurial ability

Back 21

specific special human resource known for being innovative, making strategic business decisions, and taking risks

Front 22

factors of production

Back 22

inputs to produce goods and services

Front 23

consumer goods

Back 23

products that satisfy our wants directly

Front 24

capital goods

Back 24

products that satisfy our wants indirectly by making possible more efficient production of consumer goods

Front 25

production possibilities curve

Back 25

the data represented in a production possibilities table

Front 26

law of increasing opportunity cost

Back 26

as the production of a particular good increases, the opportunity cost of producing additional units of another rises

Front 27

economic growth

Back 27

a larger total output

Front 28

economic system

Back 28

a particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem; a method for organizing an economy, of which market system and command system are the two general types

Front 29

command system

Back 29

a method of organizing an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities; command economy; communism

Front 30

market system

Back 30

all the product and resource markets of a market economy and the relationships among them; a method that allows the prices determined in those markets to allocate the economy's scarce resources and to communicate and coordinate the decisions made by consumers, firms, and resource suppliers

Front 31

private property

Back 31

the right of private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property.

Front 32

freedom of enterprise

Back 32

the freedom of firms to obtain economic resources, to use those resources to produce products of the firm's own choosing, and to sell their products in markets of their choice

Front 33

freedom of choice

Back 33

the freedom of owners of property resources to employ or dispose of them as they see fit, of workers to enter any line of work for which they are qualified, and of consumers to spend their incomes in any manner they think is appropriate

Front 34

self-interest

Back 34

that which each firm, property owner, worker, and consumer believes is best for itself and seeks to obtain

Front 35

competition

Back 35

the presence in a market of independent buyers and sellers competing with one another along with the freedom of buyers and sellers to enter and leave the market

Front 36

market

Back 36

any institution or mechanism that brings together buyers and sellers of a particular good or service

Front 37

specialization

Back 37

the use of the resources of an individual, a firm, a region, or a nation to concentrate production on one or a small number of goods and services

Front 38

division of labor

Back 38

the separation of the work assigned to produce a product into a number of different tasks that are performed by different workers; specialization of labor

Front 39

medium of exchange

Back 39

any item sellers generally accept and buyers generally use to pay for a good or service; money; a convenient means of exchanging of goods and service without engaging in barter

Front 40

barter

Back 40

the exchange of goods and services for another good or service

Front 41

money

Back 41

any item that is generally acceptable to sellers in exchange for goods and services

Front 42

consumer sovereignty

Back 42

determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of the economy; consumer's direction of production through their dollar votes

Front 43

dollar votes

Back 43

the "votes" that consumers and entrepreneurs cast for the production of consumer and capital goods, respectively, when they purchase these goods in product and resource markets

Front 44

creative destruction

Back 44

the hypothesis that the creation of new products and production methods simultaneously destroys the market power of existing monopolies

Front 45

invisible hand

Back 45

the tendency of firms and resource suppliers that seek to further their own self-interests in competitive markets to also promote the interest of the society

Front 46

circular flow diagram

Back 46

an illustration showing the flow of resources from households to firms and of products from firms to households. these flows are accompanied by reverse flows of money from firms to households and vice versa.

Front 47

resource market

Back 47

a market in which households sell and firms buy resource or the services of resources

Front 48

product market

Back 48

a market in which products are sold by firms and bought by households

Front 49

demand

Back 49

the amounts of a good or service consumers want

Front 50

demand schedule

Back 50

a schedule showing the amounts of a good or service that buyer(s) wish to purchase at various prices during some time period

Front 51

law of demand

Back 51

the principle that, other things equal, an increase in a product's price will reduce the quantity demanded and vice versa

Front 52

diminishing marginal utility

Back 52

in any specific time period, each buyer of a product will derive less utility from each successive unit of the product consumed

Front 53

income effect

Back 53

a change in the quantity demanded of a product that results from the change in real income caused by a change in the product's price

Front 54

substitution effect

Back 54

1. a change in the quantity demanded of a consumer good that results from a change in its relative expensiveness caused by a change in the product's price
2. the effect of a change in the price of a resource on the quantity of the resource employed by a firm, assuming no change in its output

Front 55

demand curve

Back 55

a curve illustrating demand

Front 56

determinants of demand

Back 56

factors other than price that determine the quantities demanded of a good/service

Front 57

normal goods

Back 57

a good/service whose consumption increases when income o\increases and falls when income decreases, price remaining constant

Front 58

inferior goods

Back 58

a good/service whose consumption declines as income rises (and conversely), price remaining constant

Front 59

substitute good

Back 59

products or services that can be used in place of each other. when the price of one falls, the demand for the other product falls and vice versa

Front 60

complementary good

Back 60

product and services that are used together. when the price of one falls, the demand for the other increases

Front 61

change in demand

Back 61

a change in the quantity demanded of a good or service at every price; a shift of the demand curve to the left or right

Front 62

change in quantity demanded

Back 62

a change in the amount of a product that consumers are willing and able to purchase because of a change in the product's price

Front 63

supply

Back 63

the amount of a good or service that seller(s) offer

Front 64

supply schedule

Back 64

a schedule showing the amounts of a good or service a seller(s) will offer at various prices during some period

Front 65

law of supply

Back 65

the principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and vice versa

Front 66

supply curve

Back 66

a curve illustrating supply

Front 67

determinants of supply

Back 67

factors other than price that determine the quantities supplied of a good or service

Front 68

change in supply

Back 68

a change in the quantity supplied of a good or service at every price; a shift of the supply curve to the left or right

Front 69

change in quantity supplied

Back 69

a change in the amount of a product that producers offer for sale because of a change in the product's price

Front 70

equilibrium price

Back 70

the price in a competitive market at which the quantity demanded and the quantity supplied are equal, there is neither a shortage nor a surplus, and there is no tendency for the price to rise and fall

Front 71

equilibrium quantity

Back 71

1. the quantity demanded and supplied at the equilibrium price in a competitive market
2. the profit-maximizing output of a firm