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;
136 Cards in this Set
- Front
- Back
- 3rd side (hint)
|
Economics |
The study of the choices people make to attain their goals given their scarce resources |
|
|
|
Scarcity |
A situation in which unlimited wants exceed the limited resources available to fulfill those wants |
|
|
|
Microeconomics |
The study of how housegolds and firms make choices, how they interact in markets, and how the government attempts to influence their choices |
|
|
|
Macroeconomics |
The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth |
|
|
|
Trade-off |
The idea that because of scarcity producing more of one good or service means producing less of another good or service |
|
|
|
Opportunity cost |
The highest-valued alternative given up in order to engage in some activity |
|
|
|
Rational behavior |
When a consumer or firm weighs the benefits and costs of each action and tries to make the best decision possible |
|
|
|
Marginal analysis |
Involves comparing marginal benefits and marginal costs |
|
|
|
Market |
A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade |
|
|
|
Market economy |
An economy in which the decisions of households and firms interacting in markets allocate economic resources |
US economy |
|
|
Centrally planned economy |
An economy in which the government decides how economic resources will be allocated |
Soviet union |
|
|
Mixed economy |
An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources |
|
|
|
Productive efficiency |
Because household and firms look at prices when deciding what to buy and sell they unknowingly take into account the social costs of their actions |
|
|
|
Allocative efficiency |
Prices guide decision makers to reach outcomes that tend to maximise the welfare of society as a whole |
|
|
|
North America free trade agreement |
Made it easier for the US firms to ship products from Mexico to the United States |
|
|
|
Offshoring |
Manufacturing companies relocated production overseas due to the low cost of labour and limited government regulations |
|
|
|
Reshoring |
Manufacturing companies returning from overseas |
|
|
|
Economic models |
Simplified versions of reality used to analyse real world economic situations |
|
|
|
Rational individuals |
Weigh the benefits and costs of each action and shoes in action only if benefit outweighs cost |
|
|
|
Optimal decision |
Continue any action up to the point where the marginal benefits equal the marginal cost |
|
|
|
Hypothesis |
Statement about an economic variable that may be right or wrong |
|
|
|
Social science |
Applying the scientific method to the study of the interactions among individuals |
|
|
|
Positive analysis |
Concerned with what is, measures cost and benefit of courses of action |
|
|
|
Normative analysis |
Concerned with what ought to be, how people evaluate the trade off |
|
|
|
Comparative advantage |
When a country can produce a good at a lower opportunity cost than competitors |
|
|
|
Firm |
An organisation that produces a good or service |
Firm company and business are used interchangeably |
|
|
Invention |
A new good or a new process for making a good |
|
|
|
Innovation |
Any significant improvement in a good or in the means of producing a good |
The practical application of an invention |
|
|
Technology |
The processes of firm uses to produce goods or services |
|
|
|
Goods |
Tangible merchandise |
|
|
|
Services |
Activities preformed for others |
|
|
|
Revenue |
The total amount a firm receives for selling a good or service |
|
|
|
Profit |
The difference between a firm's revenue and its costs |
|
|
|
Accounting profit |
Excluding the costs of some economic resources that a firm does not pay for explicitly |
|
|
|
Economic profit |
Including the opportunity cost of all Resources used by the firm |
|
|
|
Households |
All persons occupying a home, Suppliers of factors of production used by firms to make goods and services |
|
|
|
Factors of production |
Use by firms to produce goods and services |
Labour capital natural resources and entrepreneurial ability |
|
|
Financial capital |
Stocks and bonds issued by firms bank accounts and holding of money |
|
|
|
Physical capital |
Manufactured goods that are used to produce other goods and services |
|
|
|
Capital stock |
The total amount of physical capital available in a country |
|
|
|
Human capital |
The accumulated training and skills that workers possess |
|
|
|
Graphs |
Simplify economic ideas and make ideas more concrete so to be applied to real world problems |
Used to illustrate key economic ideas |
|
|
Maps |
Simplified versions of reality |
|
|
|
Market shares |
Percentage of industry sales accounted for by different firms |
|
|
|
Bar graph |
Market share of each group of firms represented by height of its bar |
|
|
|
Pie chart |
Market share of each group of firms represented by the size of its Slice of pie |
|
|
|
Time-series graph |
Shows on a coordinate read how the values of a variable change over time |
Mainly used by macroeconomics |
|
|
Origin |
Point where vertical axis intersects with horizontal axis (0,0) |
|
|
|
Truncated (//) |
Some numbers on a graph are omited |
|
|
|
Demand curve |
Graph showing relationship between price of good and the quantity of good demanded at each price |
All other Variables are held constant |
|
|
Slope |
How much the variable measuring on the Y axis changes as their able on the x-axis changes |
Change on y/change on x Larger value of slope = steeper line, smaller value of slope equals a flatter line |
|
|
Negative relationship |
When variable increases in value while the other variable decreases in value |
|
|
|
Positive relationship |
Values of both variables increase or decrease together |
|
|
|
Disposable personal income |
Total income received by households |
|
|
|
Consumption spending |
Spending by households on goods and services |
|
|
|
Omitted variable |
Variable that affects the other variables in the analysis and its omission can lead to false conclusions about cause-and-effect |
|
|
|
Reverse causality |
Error occurring when we conclude that changes on variable X cause changes in variable Y but really changes in Y caused the changes in X |
|
|
|
Linear |
Represented by a straight line |
|
|
|
Nonlinear |
Represented by a curved line |
|
|
|
Percentage change |
Change in some economic variable usually from one period To the next expressed as a percentage Economic growth rate |
(( Volume in the 2nd period - value in the 1st period)/ Value in the 1st period) *100 Units don't matter |
|
|
Gross domestic product(GDP) |
Volume of all the final goods and services produced in a country during a year |
|
|
|
Total revenue |
Equal to the amount it receives from selling its product or the quantity sold multiplied by the price |
Area of a rectangle on a graph= base×height Area of a triangle on a graph=1/2×base×height |
|
|
To develop a model |
1.Decide on the assumptions to use 2.Formulate a testable hypothesis 3.Use economic data to test hypothesis 4.Revise the model if it fails to explain economic data well 5.Retain the revised model to help answer similar economic questions in future |
|
|
|
Marginal changes |
Smalle incremental adjustments to an existing plan of action |
|
|
|
At the margin |
Where people make decisions by comparing costs and benefits |
|
|
|
Externality |
The impact of one person or firm's actions on the well being of a bystander |
|
|
|
Market failure |
Occurs when the market fails to allocate resources efficiently |
Maybe caused by externality or market power |
|
|
Market power |
The ability of a single person or firm to unduly influence market prices |
|
|
|
Production possibilities frontier(ppf) |
A curve showing the maximum attainable combinations of 2 goods that could be produced with available resources and current technology |
|
|
|
Absolute average |
The ability of individual a firm or a country to produce more of a good or service than competitors using the same amount of resources |
|
|
|
Comparative advantage |
The ability of an individual a firm or a country to produce a good or service at a lower opportunity costs than competitors |
|
|
|
Factor markets |
Where households receive payments for factors of production by selling them to firms |
|
|
|
Trade |
Results from the decisions of millions of Of households and firms around the world |
Key activity that takes place in markets the act of buying and selling |
|
|
Attainable points |
All combinations either on the frontier or inside the frontier with Resources available |
|
|
|
Efficient points |
Combinations on the frontier all available resources are being fully utilised in the fewest possible resources are being used to produce a given amount of output |
|
|
|
Inefficient points |
Combinations inside the frontier maximum output is not being obtained from the available resources, cause can be The assembly line is not operating at capacity |
|
|
|
Unattainable points |
Points beyond the production possibilities frontier given firms current resources |
|
|
|
Increasing marginal opportunity cost |
Occurs because some workers machines and other resources are better suited To one use than another economy moves down production Possibilities frontier |
|
|
|
Technological change |
Makes it possible to produce more goods with the same number of workers and the Same amount of machinery |
Shifts Production possibilities frontier outward |
|
|
Economic growth |
The ability of the economy to increase the production of goods and services |
|
|
|
Product markets |
Markets for goods and services |
Household =demanders firms= suppliers |
|
|
Factor markets |
Markets for the factors of production |
|
|
|
Labor |
All types of work |
|
|
|
Entrepreneurial ability |
The ability to bring together other factors of production to successfully produce and sell goods and services |
|
|
|
Circular flow diagram |
A model that illustrates help participants in markets are linked |
|
|
|
Free market |
A market with few government restrictions on how a good or service can be produced or sold or on how the factor of production can be employed |
|
|
|
Guild system |
Governments would give guilds or organisations of producers the authority to control the production of a good |
|
|
|
Relative price |
The price of one good or service relative to the prices of other goods or services |
|
|
|
Property rights |
The rights individuals or firms have to exclusive use of their property including the right to buy or sell it |
|
|
|
Copyrights |
Designed to protect individual intellectual property rights |
|
|
|
Demand schedule |
A table that shows the relationship between the Price of a product and the quantity of the product demanded |
|
|
|
Quantity demand |
The amount of a good or service that a consumer is willing able to purchase at a given price |
|
|
|
Demand curve |
A curve that shows the relationship between the price of a product in the quantity of the product demanded |
|
|
|
Market demand |
The demand by all the consumers of a given good or service |
|
|
|
Law of demand |
A rule that states that holding everything else constant when the price of a product falls the quantity demanded of the product will increase and when the price of a product rises the quantity demanded of the product will decrease |
|
|
|
Substitution effect |
The change in the quantity demanded of a good results because a change in price makes the good more or less expensive relative to other goods that are substitutes |
|
|
|
Income effect |
The change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power |
|
|
|
Purchasing power |
The quantity of goods a consumer can buy with a fixed amount of income |
|
|
|
Ceteris paribus condition |
Dennis sat of holding all variables Other than price constant in constructing a demand curve |
Means all else equal in latin |
|
|
A shift of the demand curve |
An increase or decrease in demand |
|
|
|
A shift of the demand curve |
An increase or decrease in demand |
|
|
|
A movement along a demand curve |
An increase or decrease in quantity demanded |
|
|
|
Normal good |
A good for which the demand increases as income rises and decreases as income falls |
|
|
|
Inferior good |
A good for which the demand increases as income falls in decreases as income rises |
|
|
|
Substitutes |
Goods and services that can be used for the same purpose |
|
|
|
Compliments |
Goods and services that are used together |
Burgers and French fries |
|
|
Demographics |
The characteristics of a population with respect to age race and gender |
|
|
|
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 showing the relationship between the price of a product in the quantity of a product supplied |
|
|
|
Supply curve |
A curve showing the relationship between the price of a product and the quantity of the products supplied |
|
|
|
Law of supply |
A rule that States that holding everything else constant increases in price cause increases in the quantity supplied and decreases in price cause decreases in the quantity supplied |
|
|
|
Input |
Anything used in the production of a good or service |
|
|
|
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 |
|
|
|
Market equilibrium |
A situation in which quantity demanded equals quantity supplied |
|
|
|
Competitive market equilibrium |
A market equilibrium with many buyers and sellers |
|
|
|
Surplus |
A situation in which quantity supplied is greater than quantity demanded |
|
|
|
Shortage |
When the quantity demanded is greater than the quantity supplied |
|
|
|
Variables affecting market supply |
Prices of inputs,, Technological change, Prices of related goods in production, Number of firms in the market, Expected future prices |
|
|
|
Variables that influence market demand |
Income, Prices of related good, Tastes , Population and demographics, Expected future prices |
|
|
|
Price controls |
Legally binding maximum or minimum prices inacted by the government |
|
|
|
Price ceiling |
A legally determined maximum price that sellers may charge |
Rent control |
|
|
Price floor |
A legally determined minimum price that sellers may recieve |
Minimum wage |
|
|
Consumer surplus |
The difference between the highest price a consumer is willing to pay for a good or service and the actual price they pay |
|
|
|
Marginal benefit |
The additional benefit to a consumer from consuming one or more unit of a good or service |
Demand curve |
|
|
Marginal cost |
The additional cost to a firm of producing one or more unit of a good or service |
Supply curve |
|
|
Producer surplus |
The difference between the lowest price a firm would be willing to accept for a good or service and the price actually receives |
|
|
|
Economic surplus |
The sum of consumer surplus and producer surplus |
Maximise when the market is in equilibrium |
|
|
Dead weight loss |
The reduction in economic surplus resulting from a market not being in competitive equilibrium |
|
|
|
Economic efficiency |
A market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus in producer surplus is at a maximum |
|
|
|
Farm program |
Government intervention in agriculture |
Started in the great depression |
|
|
Subsidies |
Cash payment based on the number of acres planted by the federal government to farmers |
|
|
|
Earned income tax credit |
Policy that reduces the amount of tax that lower income wage earners paid to the federal government |
|
|
|
Black market |
In market in which buying and selling take place at prices that violate government price regulations |
|
|
|
Public finance |
Analysing taxes |
|
|
|
Excess burden |
The deadweight loss from a tax |
|
|
|
Tax incidence |
The actual division of the burden of a tax between buyers and sellers |
|
