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61 Cards in this Set
- Front
- Back
Economize |
To use limited resources efficiently in production |
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Economics |
The study of the way society makes decisions about the use of scarce resources. |
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Economy |
A self-sustaining system in which many independent transactions in the society create distinct flows of money and products. |
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Effective |
A particular use of resources that achieves a desired end, such as consumption |
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Efficient |
The use of a bare minimum of resources to achieve a desired end, such as consumption |
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Opportunity cost |
The opportunity cost is what could have been done with the resources when a decision is made about their use. The opportunity cost is the opportunity lost (the second most preferable option). |
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Positive Economics (Analytical) |
“What is?” The branch of economics that deals with facts and direct observation of the world. |
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Normative Economics |
“What ought to be?” The branch of economics that deals with value judgements about economic subjects rather than facts and observations. |
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Scientific method: |
Used to make discoveries in sciences. 4 steps: Observation Data collection Explanation Verification. |
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Production Possibility Curve (PPC) |
A graphical representation of the production choices facing and economy |
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Trade-offs |
The sacrifice of one resource or production choice for another. |
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Consumer goods |
Those goods or services that an economy produces to satisfy human needs |
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Productive resources |
anything that can be used to manufacture goods or services. |
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Capital goods: |
Goods such as tools or machinery used to produce consumer goods. |
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Relative cost |
The cost of producing one item, A, expressed in terms of the numbers of another item, B, which must be given up in order produce A (i.e. A’s opportunity cost). |
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Law of increasing relative cost: |
The increase in the relative cost of producing more of item A, measured by the numbers of another item, B, that could be produced with the same resources. |
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Law of diminishing returns |
Decrease in the marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, while the amounts of all other factors of production stay constant. |
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Frontier |
The curve on a production possibilities graph representing the maximum numbers of two items that can be produced with a given amount of resources. |
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Output |
The products produced by using resources or inputs such as land, labor, or capital. |
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Law of increasing returns to scale |
The increase in the rate of extra outputs produced when all inputs used in production are increased and no inputs are held constant. |
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Input |
Productive resources such as land, labor, or capital used to produce an output. |
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Factors of production |
Resources (such as land, labour, and capital) that are used to produce goods and services. |
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Entrepreneurship |
The contribution made by an owner, manager, or innovator who organizes land, labor, and capital to produce goods and services. |
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Capital |
A factor of production that refers to machinery, factories, warehouses, and equipment used to produce goods and services. |
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Real Capital |
A more precise term than capital for the machinery, factories, warehouses, and equipment used to produce goods and services, as distinct from financial capital. |
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Money Capital |
The funds used to acquire real capital. |
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Productivity |
A firm's ability to maximize output from the resources available, usually measured as the firm's output per worker. |
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Tangible resources |
-Land -Labor -Capital |
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Intangible resources |
-Entrepreneurship -Knowledge -Environment for enterprise. |
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Economic system |
The laws, institutions, and common practices that help a nation determine how to use its resources to satisfy as many of its people's needs and wants as possible. |
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Traditional economy |
An economic system in which production decisions are determined by the practices of the past. Bartering |
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Barter |
The trading of goods and services without the use of a monetary system; such transactions are common in traditional economies. |
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Mixed Economy |
An economic system, such as Canada's, that contain elements of free market, command, and traditional economic systems. |
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Command Economy |
An economic system in which productions decisions are made by central planners. |
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Free Market Economy |
An economic system in which production decisions are made by the actions of buyers and sellers in the market place. |
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Equity |
Fair and just distribution of income within an economy. |
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Efficiency |
A firm's ability to produce at the lowest possible cost, measured by either its cost per unit or its labor cost. |
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Self Interest |
Each individual's strongest drive is to better his or her condition. |
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Division of Labour |
The specialization of workers in a complex production process, leading to greater efficiency. |
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Market |
A place for commerce; network of buyers or sellers. also, the demand for a product; a price determination process. |
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Demand |
Quantity of a good or service that buyers will purchase at various prices during a given period of time |
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Law of demand |
Quantity demanded of a product varies inversely with its price, as long as other things do not change. |
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Demand schedule |
A table showing the quantity demanded of a product at particular prices. |
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Ceteris paribus |
Latin for “other things being equal” or “as long as other things do not change”; an assumption made when economists want to understand the cause-and-effect relationship between any two factors and want other factors affecting that relationship to be held constant. |
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Demand curve |
A straight line or curve on the graph illustrating the demand schedule for a product. |
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Market demand schedule |
The sum total of all the consumer demands for good or service. |
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Shifts in the demand curve and its impact on price and quantity produced |
If the demand curve shifts to the left, there is less supplied, if it shifts right, there will be more supplied. |
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Equilibrium price |
A price set by the interaction of demand and supply in which the absence of surpluses or shortages in the market means there is no tendency for the price to change. |
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Consumer expectations |
What consumers believe will happen to the price of a product in the future; such beliefs have the effect of changing consumer demand for the product in the present. |
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Quantity demanded |
The amount of a product people are willing to buy at a certain price. |
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The difference between demand and quantity demanded |
Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price |
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Demand relationship. |
Relationship between price and quantity demanded. Price is a reflection of demand |
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Supply |
The quantities that sellers will offer for sale at various prices during a given period of time |
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Law of supply |
Quantity supplied of a product will increase if price increases and fall as price falls, as long as other things do not change. |
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Supply Schedule: |
A table showing the quantities of a product supplies at particular prices.Shifts in supply and its impact on quantity and price: |
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Substitute goods |
Goods that are similar to other goods and serve as an alternative if the price of the latter goods rises. |
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Complement goods |
Goods that are sold together along with other goods e.g gas and cars. |
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Pure/Perfect competition |
-Sellers (selling exactly into the same marker) and many buyers, -No barriers to entry into the market for new firms, and perfect knowledge of prices (so there are no price differences and no individual can influence them) |
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Supply demanded |
Amount of a certain good producers are willing to supply when receiving a certain price. |
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The difference between supply and supply demanded |
Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. |
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Supply Relationship |
The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. Price, therefore, is a reflection of supply. |