Micro Economics (Chapters 1,2,4,5,7)

Front 1

Economics

Back 1

the study of how society manages its scarce resources

Front 2

Efficiency

Back 2

the property of society getting the most it can from its scarce resources

Front 3

Equality

Back 3

the property of distributing economic prosperity uniformly among the members of society

Front 4

Opportunity Cost

Back 4

whatever must be given up to obtain some item

Front 5

Rational People

Back 5

people who systematically and purposefully do the best they can to achieve their objectives

Front 6

Marginal Changes

Back 6

small incremental adjustments to a plan of action

Front 7

Incentive

Back 7

something that induces a person to act

Front 8

Market Economy

Back 8

an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

Front 9

Property Rights

Back 9

the ability of an individual to own and exercise control over scarce resources

Front 10

Market Failure

Back 10

a situation in which a market left on its own fails to allocate resources efficiently

Front 11

Externality

Back 11

the impact of one person's actions on the well being of a bystander

Front 12

Market Power

Back 12

the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices

Front 13

Productivity

Back 13

the quantity of goods and services produced from each unit of labor input

Front 14

Inflation

Back 14

an increase in the overall level of prices in the economy

Front 15

Business Cycle

Back 15

fluctuations in economic activity, such as employment and production

Front 16

Circular-flow Diagram

Back 16

a visual model of the economy that shows how dollars flow through markets among households and firms

Front 17

Production Possibilities Frontier

Back 17

a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

Front 18

Microeconomics

Back 18

the study of how households and firms make decisions and how they interact in specific markets

Front 19

Macroeconomics

Back 19

the study of economy wide phenomena, including inflation, unemployment, and economic growth

Front 20

Positive Statements

Back 20

claims that attempt to describe the world as it is

Front 21

Normative Statements

Back 21

claims that attempt to prescribe how the world should be

Front 22

Market

Back 22

a group of buyers and sellers of a particular good or service

Front 23

Competitive Market

Back 23

a market i which there are many buyers and many sellers so that each has a negligible impact on the market price

Front 24

Quantity Demanded

Back 24

the amount of a good that buyers are willing and able to purchase

Front 25

Law of Demand

Back 25

the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises

Front 26

Demand Schedule

Back 26

a table that shows the relationship between the price of a good and the quantity demanded

Front 27

Demand Curve

Back 27

a graph of the relationship between the price of a good and the quantity demanded

Front 28

Normal Good

Back 28

a good for which, other things equal, an increase in income leads to an increase in demand (most goods, jewelry, cars, etc)

Front 29

Inferior Good

Back 29

a good for which, other things equal, an increase in income leads to a decrease in demand (if you increase income, you are less likely to ride the bus)

Front 30

Substitutes

Back 30

two goods for which an increase in the price of one leads to an increase in the demand for the other (hot dogs and hamburgers, sweaters and sweatshirts, movie tickets and video rentals)

Front 31

Shift in demand curve

Back 31

1. Income
2. Prices of related goods
3. Tastes
4. Expectations
5. Number of buyers

Front 32

Quantity supplied

Back 32

the amount of a good that sellers are willing and able to sell

Front 33

Law of supply

Back 33

the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

Front 34

Supply Schedule

Back 34

a table that shows the relationship between the price of a good and the quantity supplied

Front 35

Supply Curve

Back 35

a graph of the relationship between the price of a good and the quantity supplied

Front 36

Market Supply and Market Demand

Back 36

the sum of the individual supply or demand

Front 37

Shifts in the supply curve

Back 37

1. Input Prices
2. Technology
3. Expectations
4. Number of sellers

Front 38

Equilibrium

Back 38

a situation in which the market price has reached the level at which quantity supplied equals quantity demanded

Front 39

Equilibrium Price

Back 39

the price that balances quantity supplied and quantity demanded

Front 40

Equilibrium Quantity

Back 40

the quantity supplied and the quantity demanded at the equilibrium price

Front 41

Surplus

Back 41

a situation in which quantity supplied is greater than quantity demanded

Front 42

Shortage

Back 42

a situation in which quantity demanded is greater than quantity supplied

Front 43

Law of supply and demand

Back 43

the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance

Front 44

Elasticity

Back 44

a measure of the responsiveness of quantity demanded or quantity supplied to one its determinants

Front 45

Price Elasticity of Demand

Back 45

Percentage change in quantity demanded/ Percentage changed in price

Factors:
1. Availability of close substitutes
2. Necessities vs. Luxuries
3. Definition of the Market
4. Time Horizon

Front 46

Total Revenue

Back 46

the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold (P * Q)

Front 47

Income Elasticity of Demand

Back 47

Percentage change in quantity demanded/ Percentage change in income

Front 48

Cross-Price Elasticity of Demand

Back 48

Percentage change in quantity demanded of good 1/ Percentage change in the price of good 2

Front 49

Price Elasticity of Supply

Back 49

Percentage change in quantity supplied/ Percentage change in price

Front 50

Elastic and Inelastic

Back 50

Inelastic= less than 1
Elastic= greater than 1
Unit Elastic= 1

Front 51

Welfare Economics

Back 51

the study of how the allocation of resources affects economic well-being

Front 52

Willingness to Pay

Back 52

the maximum amount that a buyer will pay for a good

Front 53

Consumer Surplus

Back 53

the amount a buyer is willing to pay MINUS the amount the buyer actually pays for it

Front 54

Cost

Back 54

the value of everything a seller must give up to produce a good

Front 55

Producer Surplus

Back 55

the amount a seller is paid for a good MINUS the sellers cost of providing it

Front 56

Efficiency (definition 2)

Back 56

the property of a resource allocation of maximizing the total surplus received by all members of society