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Econ 104 1st test Flash Cards
Economic Terms
33
Economics
Undergraduate 1
02/20/2013

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Term
Paradigm
Definition
a philosophical or theoretical framework of which laws and theories can be applied
Term
Theory of the invisible hand
Definition
force that allows for producers and consumers to act in their self interest but results in a socially optimal market system
Term
Laissez Faire
Definition
Latin for "Let the people do". Also the ideal role of the government in our system
Term
Models
Definition
simplifications of reality with only essential elements
Term
Ceteris Paribus
Definition
Latin for "Nothing else changes"
Term
Normative Economics
Definition
Subjective type of economics using thoughts regarding "What should be"
Term
Positive Economics
Definition
Objective and factual based type of economics regarding "What is"
Term
Opportunity Cost
Definition
Your next best option
Term
Pig Principle
Definition
If something is good, then more is always better
Term
Diminishing returns
Definition
More work to get the same return as time passes
Term
Absolute Advantage
Definition
Term for when you are the best and have all the qualifications in a specified process
Term
Comparative Advantage
Definition
A term for when you have the lowest opportunity cost in a specified process
Term
Autarky
Definition
A term meaning no trade
Term
Demand
Definition
Ability and willingness to buy specific quantities of a good/service at given prices in a given time period (Nothing else changes)
Term
Law of demand
Definition
The quantity of a g/s demanded in a given time period increases as its price falls
Term
Demand Schedule
Definition
A data table detailing the quantity demanded and the price at the each quantity
Term
Demand Curve
Definition
A downward slope curve representing the relationship between Quantity demanded and price
Term
Substitutes
Definition
Goods that can be alternates to each other (i.e., Pizza & Hamburgers)
Term
Complements
Definition
Goods that are most likely to be purchased following the purchase of another good (i.e., french fries & ketchup)
Term
Movement along a Demand curve
Definition
Change in a curve based on changes in: Price and Quantity Demanded (Nothing else changes)
Term
Shift of a Demand curve
Definition
Change in a curve based on changes in: income, consumer tastes, substitutes, complements, information, market size etc… (Many changes)
Term
Movement along a supply curve
Definition
Change in a curve based on changes in: Quantity Supplied or Price (Nothing else Changes)
Term
Shift of a Supply Curve
Definition
Changes in a curve based on changes in: technology, environment, expectations, price of inputs etc… (Many Changes)
Term
Supply
Definition
The total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period, while nothing else changes
Term
Law of Supply
Definition
The quantity of a g/s supplied in a given time period increases as its price increases while nothing else changes
Term
Supply Schedule
Definition
A data table detailing the quantity supplied and the price at each quantity
Term
Supply Curve
Definition
An upward slope curve representing the relationship between Quantity supplied and price
Term
Production Possibility Frontier
Definition
A graphical representation detailing the possibilities of quantities of efficient outputs of two products
Term
Inefficient Output
Definition
A point below the line of efficiency on the PPF that represents not using resources to their maximum potential
Term
Unattainable Output
Definition
A point above the line of efficiency that you can never achieve because you don't have enough resources
Term
Mercantilist Thought on International Trade
Definition
Belief that trade is a zero-sum game: Competition where there will be losers but inevitably also losers. And, that gold represents wealth
Term
Adam Smith's thoughts on International Trade
Definition
Thought that trade can be mutually beneficial. And, people should specialize based on absolute advantage
Term
David Ricardo's thoughts on International Trade
Definition
Thought that opportunity cost had to be emphasized. Specialize based on comparative advantage. This is the more widely accepted view now
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