Term
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Definition
| the amount that buyers are willing and able to buy at a series of possible prices in a given period of time |
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Term
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Definition
| as price goes up, quantity demanded goes down. In other words, there is an inverse relationship between price and quantity demanded. |
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Term
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Definition
| to find the market demand, simply add together the individual demands of all the buyers in the market |
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Term
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Definition
| tastes, number of buyers, income, prices of related goods, consumer expectations |
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Term
| Changes in _____1______ are caused by changes in one or more of the determinants of demand and involve ______2_________. Changes in _____3_______ are caused by changes in price and involve ________4_______. |
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Definition
1) demand
2) shifting the entire demand curve
3) quantity demanded
4) moving along an already existing demand curve |
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Term
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Definition
| The amount that sellers are willing and able to sell at a series of possible prices in a given period of time |
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Term
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Definition
| As price goes up, quantity supplied goes up. There is a direct relationship between price and quantity supplied. |
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Term
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Definition
| to find the market supply, simply add together the individual supplies of all the sellers in the market |
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Term
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Definition
| resource prices, number of sellers, taxes and subsidies, producer expectations, technology |
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Term
| Changes in _______1______ are caused by changes in one or more of the determinants of supply and involve _____2_____. Changes in ________3____ are caused by changes in price and involve ______4______. |
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Definition
1) supply
2) shifting the entire supply curve
3) quantity supplied
4) moving along an already existing supply curve |
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Term
In the circular flow model, households are the ____1______ in the product market and they are the _____2______ in the resource market.
Firms are ____3______ in the product market and _____4____ in the resource market. |
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Definition
1) buyers
2) sellers
3) sellers
4) buyers |
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Term
| REASONS FOR THE LAW OF DEMAND (4) |
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Definition
1) price is an obstacle to buying power
2) law of diminishing marginal utility
3) income effect
4) substitution effect |
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Term
| Why does the law of diminishing marginal utility help explain the law of demand? |
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Definition
| As you consume more of a product, you derive less and less satisfaction from each successive unit consumed. Therefore, you will be willing to pay less for larger units of output. |
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Term
| Why does the income effect help explain the law of demand? |
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Definition
| The income effect states that as the price of a good increases, that good becomes a higher percentage of your income. Therefore, you will be willing to buy less of that good at higher prices because the higher priced good will eat into your income more than a lower priced good. |
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Term
| Why does the substitution effect help explain the law of demand? |
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Definition
| The substitution effect states that as price goes up for good A, then good A becomes more expensive relative to all other goods. Therefore, you will tend to buy less of good A and more of other goods. |
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Term
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Definition
As consumer tastes are directed towards a good, then demand increases, shifting the demand curve to the right.
As consumer tastes are directed away from a good, then demand decreases, shifting the curve to the left. |
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Term
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Definition
Income's effect on demand depends upon whether you are talking about a normal good or an inferior good:
With normal goods, as income goes up, demand goes up; and as income goes down, demand goes down
With inferior goods, as income goes up, demand goes down; and as income goes down, demand goes up |
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Term
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Definition
If the number of buyers increases, demand increases, shifting the demand curve to the right
If the number of buyers decreases, demand decreases, shifting the demand curve to the left |
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Term
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Definition
This depends on whether or not you are talking about substitute goods or complement goods.
If the price of a good goes up, the demand for its substitute goes up, and vice versa.
If the price of a good goes up, the demand for its complement goes down, and vice versa. |
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Term
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Definition
If consumers expect price to go up in the future, they will buy more now, making demand go up and therefore shifting the demand curve to the right
If consumers expect price to go down in the future, they will buy less now (and wait to buy more after the price rises), making the demand decrease and therefore shifting the demand curve to the left |
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Term
| Reasons for the law of supply (2) |
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Definition
1) higher price means more profit potential
2) law of decreasing marginal costs |
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Term
| Why does the law of decreasing marginal costs help explain the law of supply? |
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Definition
| as you expand the output of something, the cost per unit of output usually falls, enabling you to make more profit from each additional unit. |
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Term
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Definition
As resource price increase, supply decreases, shifting the supply curve to the left
As resource prices decrease, supply increases, shifting the supply curve to the right |
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Term
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Definition
An increase in technology allows one to make more from the same amount of resources, therefore increasing profitability and increasing supply, shifting the supply curve to the right.
A decrease in technology decreases profitability, thus decreasing supply and shifting the supply curve to the left. |
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Term
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Definition
Taxes decrease supply, shifting the curve to the left.
Subsidies increase supply, shifting the curve to the right. |
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Term
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Definition
If producers expect the price of their good to go up in the future, they will sell less now (and wait to sell more after the price has gone up), therefore supply will decrease now and the supply curve will shift to the left.
If producers expect the price of their good to go down in the future, they will sell more of their product now (so that they can sell the product while the price is still high), therefore supply will increase now and the supply curve will shift to the right. |
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Term
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Definition
More sellers means more supply, shifting the curve to the right.
More sellers means less supply, shifting the curve to the left. |
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Term
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Definition
| Where supply curve and demand curve meet, otherwise known as the "market clearing price" |
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Term
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Definition
| happens when price rises above equilibrium, and QS is greater than QD |
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Term
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Definition
| if price drops below equilibrium, QD will be greater than QS |
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Term
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Definition
| the condition of having unlimited wants and limited resources with which to satisfy those wants |
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Term
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Definition
| an object that is limited and desirable |
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Term
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Definition
| whenever you get something, you give up the opportunity to have the next best thing |
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Term
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Definition
| refers to the concept of opportunity costs |
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Term
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Definition
| weighing the additional benefits and additional costs involved in the next unit of an item |
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Term
| classical definition of economics |
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Definition
| The [social] science that deals with the production, distribution, and consumption of wealth” |
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Term
| Greek definition of economics |
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Definition
| OIKONOMOS: The housewife making decisions for the family in an effort to maximize utility |
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Term
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Definition
| refers to the fact that we usually act in an effort to maximize utility, rather than in a random or haphazard manner |
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Term
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Definition
| despite out efforts to maximize utility, we often make bad decisions and fall short of this goal |
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Term
| the fact that the first unit of something is usually the most satisfying derives from the concept of ____________ |
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Definition
| the law of diminishing marginal utility |
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Term
| negative marginal utility |
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Definition
| happens when the next unit of something actually takes away from your total utility, as in the case of the 12th fish taco or the 4th YooHoo |
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Term
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Definition
| concerns the big picture such as the different stages of the business cycle |
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Term
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Definition
| concerns the individual units of the economy, such as individuals, firms, and industries |
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Term
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Definition
| we have exactly maximized utility at the exact unit at which the marginal benefits and marginal costs of that unit are equal |
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Term
| the word "marginal" means ________ |
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Definition
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Term
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Definition
| land, labor, capital, entrepreneurial ability |
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Term
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Definition
| goods that increase your utility in the future, such as tractors, robots, etc |
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Term
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Definition
| goods that increase your utility now, such as pizza, Econ textbooks, etc |
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Term
| Five Fundamental Questions |
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Definition
| 1) what gets made; 2) who gets what is made; 3) how it gets made; 4) how does the system promote progress; 5) how does the system accomodate change. You will most certainly need to read about these more from your notes |
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Term
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Definition
| makes more ccapital goods such as robots, so that they can train those robots to make pizza and have more of both goods in the future |
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Term
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Definition
| makes more pizza, in lieu of robots, because they want to be satisfied right now! |
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Term
| "willing and able" is a function of what two things? |
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Definition
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Term
| Why doesnt Mr. Brigham own a Porsche? |
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Definition
| He is willing, but not able |
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Term
| Why doesnt Mr. Brigham own a Snuggie? |
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Definition
| He is able, but not willing |
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Term
| Why didnt the cup of air have value? |
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Definition
| It was desirable, but not limited |
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Term
| Why didnt the cup of nuclear waste have value? |
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Definition
| It was limited, but not desirable |
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Term
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Definition
| government owns most FOP and makes most economic decisions with the use of target outputs |
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Term
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Definition
| people own most of the FOP, and economic decisions are made through a complex system of prices which represent elaborate communication between the buyers and sellers |
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Term
| as you consume more and more of an item, the additional costs associated with each additional unit tend to increase |
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Definition
| law of increasing marginal costs |
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Term
| As Mr. Brigham eats more doughnuts, the doughnuts begin to not taste as good, and they do less and less to satisfy his hunger. This demonstrates _________________. |
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Definition
| law of diminishing marginal utility |
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Term
| As Mr. Brigham consumed more doughnuts, he began to feel full and sick, and eventually he would either throw up or badly need a nap. This demonstrates ____________. |
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Definition
| law of increasing marginal costs |
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Term
| two main problems in a command system |
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Definition
| coordination problem and incentive problem |
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Term
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Definition
| the government has a hard time syncing up the different levels of the supply chain as well as syncing up supply with demand |
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Term
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Definition
| the govt has a hard time motivating producers to make high quality products at a low cost without the incentive of profit |
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Term
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Definition
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Term
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Definition
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Term
| operating outside your PPC |
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Definition
| unattainable with your current resources |
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Term
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Definition
| economic growth (more of both) |
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Term
| 3 ways to achieve economic growth |
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Definition
| increase resource supplies, advance technology, specialization and trade |
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Term
| increase in resource supplies |
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Definition
| one of the three ways to achieve economic growth, it involves having more and/or better resources |
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Term
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Definition
| allows you to make more with the same amount of resources |
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Term
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Definition
| one of the three ways to achieve economic growth, involves people specilizing in what they have a comparative advantage in |
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Term
| doing something better than some one else |
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Definition
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Term
| doing something with a lower opportunity than someone else |
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Definition
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Term
| The PPC is "bowed out" because of _________________, which exists because of ____________________. |
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Definition
| Law of Increasing Opportunity Costs; problems in resource conversion |
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Term
| What are the four main roles of the government in a market system that we talked about in class? |
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Definition
1) Provide Public Goods and Services
2) Provide Collective Goods and Services
3) Protect Private Property and Enforce Contracts
4) Fix/Prevent Market Failures |
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Term
| public goods and services |
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Definition
| must be provided by the government; cannot be denied to a person and one persons' enjoyment does not impact another person's enjoyment |
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Term
| public goods and services |
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Definition
| must be provided by the government; cannot be denied to a person and one persons' enjoyment does not impact another person's enjoyment |
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Term
| examples of public goods and services |
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Definition
| national defense and fireworks shows |
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Term
| collective goods and services |
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Definition
| must be provided by the government; CAN be denied to a person and one person's enjoyment DOES impact another person's enjoyment |
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Term
| examples of collective goods and services |
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Definition
| roads, education, bridges, etc |
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Term
| Why does the government need to provide public goods and collective goods? |
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Definition
| Because there is little to no profit incentive for the private sector to do so |
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Term
| Why does the government need to protect private property and enforce contracts? |
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Definition
| Because we like the certainty of knowing what belongs to us and knowing that business deals will be enforced by law. Also, these two things enhance the profit incentive. |
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Term
| What are the three main types of market failures that we talked about in class? |
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Definition
| misallocation of resources, free-rider problem, Tragedy of the Commons |
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Term
| misallocation of resources |
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Definition
| over or under production of some good |
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Term
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Definition
| happens when everyone wants the benefits of something, but no one wants to pay for it (as in the case of fireworks displays) |
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Term
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Definition
| happens when individual incentives to improve directly conflict with society's incentive to improve, as in the case of a public field for cow grazing |
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Term
| free market economy with limited government intervention and production of a few public goods |
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Definition
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Term
| What are the three main benefits derived from competition within capitalism? |
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Definition
| innovation, higher quality, lower prices |
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Term
| What example did your book give for the way that capitalism shifts to meet changing consumer demand? |
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Definition
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Term
| believed that the bourgeoisie were continually disenfranchising the proletariat |
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Definition
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Term
| said "from each according to his ability, to each according to his need" |
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Definition
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Term
| said that democracy is "the worst system, except all others." |
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Definition
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Term
| he led the Bolshevik Revolution and thus brought communism to Russia |
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Definition
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Term
| he thought that communism could work in a peasant and farm-oriented society, so he led the Peasant Revolution in China |
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Definition
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Term
| he thought that communism could work in a peasant and farm-oriented society, so he led the Peasant Revolution in China |
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Definition
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Term
| What do modern economists object to about capitalism? |
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Definition
1) Wild swings of business cycle
2) Dehumanizing nature of profit
3) Development of monopolies and oligopolies
4) Environmental concerns
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Term
| He is thought to be the father of capitalism and modern economics |
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Definition
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Term
| two main types of socialism |
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Definition
| authoritarian socialism and democratic socialism |
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Term
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Definition
| brought about through revolution, leads to centralized power structure and few rights for average citizens |
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Term
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Definition
| people elect leaders to achieve a more equal distribution of wealth and a welfare state |
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Term
| equal distribution of wealth, and govt $ devoted to eliminate poverty and provide education, jobs, healthcare, retirement, and other benefits to as many citizens as possible |
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Definition
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Term
| 2 types of developing nations (according to your textbook) |
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Definition
| those with natural resources and those without natural resources |
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Term
| _________________ helps developing nations with issues of free trade while ____________ pushes for stricter protection of property rights within developing nations. |
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Definition
| WTO; OECD (Organization for Economic Cooperation and Development) |
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