Principles Of Economics Chapter 3

Front 1

firm

Back 1

An organization that transforms resources (inputs) into products (outputs

Front 2

entrepreneur

Back 2

A person who organizes, manages, and assumes the risks of a firm, taking a new idea or a new product and turning it into a successful business.

Front 3

households

Back 3

the consuming units in an economy

Front 4

product

Back 4

The markets in which goods and services are exchanged.

Front 5

input, factor markets

Back 5

The markets in which the resources used to produce products are exchanged.

Front 6

labor market

Back 6

The input/factor market in which households supply work for wages to firms that demand labor.

Front 7

capital market

Back 7

The input/factor market in which households supply their savings, for interest or for claims to future profits, to firms that demand funds to buy capital goods.

Front 8

land market

Back 8

The input/factor market in which households supply land or other real property in exchange for rent.

Front 9

land labor capital

Back 9

factors of production

Front 10

quantity demanded

Back 10

The amount (number of units) of a product that a household would buy in a given period if it could buy all it wanted at the current market price.

Front 11

demand schedule

Back 11

A table showing how much of a given product a household would be willing to buy at different prices.

Front 12

demand curve

Back 12

A graph illustrating how much of a given product a household would be willing to buy at different prices.

Front 13

law of demand

Back 13

The negative relationship between price and quantity demanded: As price rises, quantity demanded decreases; as price falls, quantity demanded increases.

Front 14

income

Back 14

The sum of all a household’s wages, salaries, profits, interest payments, rents, and other forms of earnings in a given period of time. It is a flow measure.

Front 15

wealth

Back 15

The total value of what a household owns minus what it owes. It is a stock measure.

Front 16

normal goods

Back 16

Goods for which demand goes up when income is higher and for which demand goes down when income is lower.

Front 17

inferior goods

Back 17

Goods for which demand tends to fall when income rises.

Front 18

substitutes

Back 18

Goods that can serve as replacements for one another; when the price of one increases, demand for the other increases.

Front 19

complement

Back 19

Goods that “go together”; a decrease in the price of one results in an increase in demand for the other and vice versa.

Front 20

market demand

Back 20

The sum of all the quantities of a good or service demanded per period by all the households buying in the market for that good or service.

Front 21

profit

Back 21

The difference between revenues and costs.

Front 22

quantity supplied

Back 22

The amount of a particular product that a firm would be willing and able to offer for sale at a particular price during a given time period.

Front 23

supply schedule

Back 23

A table showing how much of a product firms will sell at different prices

Front 24

law of supply

Back 24

The positive relationship between price and quantity of a good supplied: An increase in market price will lead to an increase in quantity supplied, and a decrease in market price will lead to a decrease in quantity supplied.

Front 25

supply curve

Back 25

A graph illustrating how much of a product a firm will sell at different prices.

Front 26

equilibrium

Back 26

The condition that exists when quantity supplied and quantity demanded are equal. At equilibrium, there is no tendency for price to change.

Front 27

shortage

Back 27

The condition that exists when quantity demanded exceeds quantity supplied at the current price.

Front 28

surplus

Back 28

The condition that exists when quantity supplied exceeds quantity demanded at the current price.