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The factories, machines, tools, and inventories in an economy. (education is sometimes referred to as human capital; factories, machines, etc. as physical capital.)
Capital is used in producing other goods and services.
the buildings and physical improvements, machines, and tools that businesses use to produces goods and services |
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| If the additional benefits (correctly measured) are greater than the additional costs incurred (correctly measured) , go for it. If the additional costs are greater than the additional benefits, do not do it. |
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| labor, capital, and our natural resources that can be used to produce goods and services |
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| the study of the economy as a whole. Growth of economy-wide production, changes in unemployment, and rates of inflation are the most common concerns. |
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| the increase in benefits resulting from an action. Or the increase in benefits resulting from producing one more unit of output. |
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methods through which buyers and sellers come together and in so doing determine the prices and the quantities of goods an services that will be exchanged
Means for individuals and businesses to exchange goods services, assets, and labor. |
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| the study of individual consumers, workers, producers, businesses, and industries |
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| the value of the best forgone alternative. What one really gives up doing when making a choice |
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| the process of comparing the marginal benefits and marginal costs of an action. If the marginal benefits are greater than the marginal costs, a rational decision is to undertake the action |
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| out wants are greater than our abilities to satisfy them. This leads to the necessity for making choices about how we use our resources |
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| a cost that has already been paid and cannot be removed |
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| allocating our resources to produce the kinds of goods and services we want the most |
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| Diminishing marginal returns |
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| increasing one input, while holding all other inputs constant, will eventually result in smaller and smaller additions to output |
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| using all of our resources and in a technically and allocatively efficient manner |
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| an abstract description of a part of an economy. Simplifying assumptions are made, with a goal of understanding and explaining economic events |
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| the value of the best forgone alternative. It is what one gives up doing when making a choice |
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| Principle of increasing costs |
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| as we increase the production of a good while increasing a single input, the opportunity cost eventually increases |
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| Production possibilities frontier |
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| an economic model showing possible combinations of outputs, given resources and technology |
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| using methods to produce goods and services that minimize costs of producing or maximize output given out inputs |
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| goods that are used together. When the price of one good increases, the demand for its complementary good decreases. |
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| A table or graph showing the quantity of a good demanded at each price, assuming that all possible influencing factors other than price remain constant. |
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| A simplified explanation or a part of the economy. Economic models often focus on specific relationships and make assumptions about other possible influences remaining constant. |
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| the price at which quantity supplied is equal to quantity demanded. The market is in equilibrium, that is, equilibrium price will not change until something else changes. |
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| The quantity of a good bought and sold when quantity supplied equals quantity demanded. The equilibrium quantity will not change until something else changes. |
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| a market is in equilibrium, with an equilibrium price and equilibrium quantity, when the quantity demanded equals the quantity supplied. |
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| a good is inferior, if in response to an increase in income, individuals decrease their consumption of the good. |
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| the resources - labor, land, and capital - businesses use in producing goods and services. Those resources are often described as factors of production. |
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| the principle that price and quantity demanded are inversely related. A decrease in price, assuming nothing else changes, will cause an increase in the quantity demanded and an increase in price will cause a decrease in the quantity demanded. The law of demand implies a negatively sloped demand curve. |
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| The market price and the quantity exchanged in a perfectly competitive market will move toward the price and quantity where quantity supplied is equal to quantity demanded. |
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| Movements along a demand curve |
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| a change in quantity demanded cause by a change in a good's price |
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| Movements along a supply curve |
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| a change in quantity supplied caused by a change in a good's price |
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| a good is normal, If in response to an increase in income, individuals increase their consumption of the good |
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| the quantity of a good or service that consumers intend to purchase throughout a given time period at a certain price |
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| the quantity of a good or service hat producers intend to sell throughout a given time period at a certain price. |
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| Shift in the demand curve |
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| A change in the quantities consumers are willing and able to purchase at each price. The shift is caused by changes other than a change in price. For instance, changes in income, tastes, expectations, population, and prices of substitute ad complementary goods may lead to shift in demand. |
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| Shift in the supply curve |
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| a change in the quantities producers are willing and able to sell at each price. The shift is caused by changes other than change in price. For instance, rising labor costs (a price of an input) cause a shift to the left of the supply curve (a decrease in supply). Changes in prices of other inputs of changes in technology will also shift the supply curve. |
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| at a single price, the quantity demanded is greater than the quantity supplied |
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| goods that can be used in place of one another. When the price of one increases, the demand for a substitute good increases |
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| a table (schedule) or graph (curve) showing he quantity of a good that producers are willing to supply at each price, assuming that all possible influencing factors other than prince remain constant. |
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at a single price, the quantity supplied is greater than the quantity demanded.
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| demand is elastic when the percentage change in the quantity demanded is greater than the percentage change in the price of the good or service. The price elasticity of demand is greater than one. |
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| Income elasticity of demand |
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| the percentage change in quantity demanded of a good or service divided by the percentage change in income |
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| demand is inelastic when the percentage change in the quantity demanded is less than the percentage change in the price of the good or service. The price elasticity of demand is less than one. |
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| a legal minimum for wages for most categories of workers. |
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| a good or service that is viewed by consumers as a high priority. Consumers tend to be less sensitive to price changes of goods that are assumed to be necessities. |
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| the legal maximum price for which a good or service can be sold. Examples include laws limiting apartment rents in some cities. |
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| Price elasticity of demand |
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| the percentage change in quantity supplied of a good or service divided by the percentage change in price |
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| the legal minimum price at which a good or service an be sold. An example is the federal minimum wage, currently $5.15 per hour |
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| A legal maximum rent that can be charged for some apartments in some major cities. |
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| payments from governments to producers or consumers of specific goods and services |
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| goods or services tat are assumed to serve similar purposes |
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| a tax placed on an imported good |
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| the difference between the total value to the consume of consuming a specific amount of a good and the amount the consumer must pay for that amount of the good |
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| Law of diminishing marginal utility |
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| as a consumer purchases more of a good in a specific time period, the additional satisfaction enjoyed from the additional unit of the good will diminish. |
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| a consumer will maximize the total well-being if the last dollar spent on each good provides the same marginal (additional) utility |
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| the change in total utility or satisfaction resulting from consuming one more unit of a good or service |
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| income adjusted for price changes. A measure of the amount of goods and services one can purchase |
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| the total amount of satisfaction enjoyed from consuming a specific amount of a good or service |
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| the satisfaction gained from consuming a good or service |
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