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| the study of how societies provision themselves through material means of existence. |
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| an exchange of goods and services for money |
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| the study of how human beings coordinate their wants a desires, given the decision making mechanisms, social customs, and the political realities of the society |
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| the goods available are too few to satisfy individuals’ desires |
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| additional cost to you over and beyond the costs you have already incurred |
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| costs that have already been incurred and cannot be recovered. |
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the additional benefit above what you’ve already derived. |
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| : if the marginal benefits of doing something exceed the marginal cost, do it. If the marginal costs of doing something exceed the marginal benefit, don’t do it. |
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| the benefit that you might have gained from choosing the next best option |
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| the necessary reactions to scarcity. |
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| economic force that is given relatively free rein by society to work thru the market. |
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| the price mechanism, the rise and fall of prices that guides our actions in a market |
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| a framework that places the generalized insights of the theory in a more specific contextual setting. |
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| a commonly held economic insight stated as a law or general assumption |
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| achieving a goal as cheaply as possible |
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a market economy, thru the price mechanism, will tend to allocate resources efficiently. |
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| the study of individual choice, and how that choice is influenced by economic forces |
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| the study of the economy as a whole. |
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| or (or inaction) taken by the government to influence economic actions |
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| the study of what is, and how the economy works. |
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| the study of what the goals of the economy should be |
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the application of the knowledge learned in positive economics to the achievement of the goals one has determined in normative economics. |
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| Production Possibility Curve |
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a curve measuring the maximum combination of outputs that can be obtained from a given number of inputs. |
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| what you put into a production process to achieve an output |
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| the result of an activity |
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the ability to be better suited to the production of one good than to the production of another good. |
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achieving as much output as possible from a given amount of inputs and resources. |
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getting less output from inputs that, if devoted to some other activity, would produce more output. |
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| achieving a goal using as few inputs as possible |
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| an economic policy of leaving coordination of individuals’ actions to the market. |
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| the relocation of production once done in the US to foreign countries |
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increasing integration of economies, cultures, and institutions across the world.
increases competition by allowing greater specialization and division of labor |
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the wages of workers in one country will not differ significantly from the wages of equal workers in another institutionally similar country. |
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| quantity demanded rises as price falls, everything else held constant |
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| graphic representation of the relationship between price and quantity demanded. |
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| a schedule of quantity of a good that will be bought per unit of time at various prices, everything else held constant. |
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| a specific amount that will be demanded per unit time at a specific price, everything else held constant. |
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| a graphical representation of the effect of anything OTHER THAN PRICE on demand. |
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| Movement Along a Demand Curve |
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graphical representation of the effect of a change in price on the quantity demanded. |
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| horizontal sum of all individual demand curves |
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| quantity supplied rises as price rises, other things constant |
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| graphical representation of the relationship between price and quantity supplied |
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specific amount that will be supplied at a specific price. |
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| Movement Along a Supply Curve |
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graphical representation of the effect of a change in price on the quantity supplied. |
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| a graphical representation of the effect of anything OTHER THAN PRICE on supply |
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| horizontal sum of all individual supply curves. |
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| concept in which opposing dynamic forces cancel each other out |
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| the amount bought and sold at the equilibrium price |
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| the price towards which the invisible hand drives the market |
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| SURPLUS – quantity supplied is greater than quantity demanded |
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| SHORTAGE – quantity demanded is greater than quantity supplied |
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| the false assumption that what is true for a part will also be true for the whole |
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· Society’s income
· The prices of other goods
· Tastes
· Expectations
· Taxes on and subsidies to consumers |
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· Price of inputs
· Technology
· Expectations
· Taxes and subsidies |
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| the price of one country’s currency in terms of another country’s currency |
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| the currency used by 13 of the members of the European Union |
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| government imposed limit on how high a price can be charged |
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a price ceiling on rents, set by gov’t. |
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| government imposed limits on how low a price can be charged |
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| laws specifying the lowest wage a firm can legally pay an employee |
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| tax that is levied on a specific good |
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| an excise tax on an imported good. |
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| Third Party Payer Markets |
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the person who receives the good differs from the person paying for the good. |
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| the value the consumer gets from buying a product less its price |
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| the price the producer sells the product for less the cost of producing it |
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| the loss of consumer and producer surplus from a tax. |
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| a geometric representation of the welfare cost in terms of misallocated resources caused by a deviation from a supply/demand equilibrium |
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| a tax levied on a specific good |
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| seeking activities – activities designed to transfer surplus from one group to another |
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economists who integrate an economic analysis of politics with their analysis of the economy. |
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| General Rule of Political Economy |
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Definition
| when small groups are helped by a government action and large groups are hurt by the same action, the small group tends to lobby far more effectively than the large group; thus policies tend to reflect the small groups interest, not the interest of the large group |
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| IF DEMAND IS MORE INELASTIC THAN SUPPLY, CONSUMERS WILL PAY A HIGHER PERCENTAGE OF THE TAX; IF SUPPLY IS MORE INELASTIC THAN DEMAND, SUPPLIERS WILL PAY A HIGHER SHARE |
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