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Ms. Dean Econ
Economics Terms for Ms. Dean's Economics Class at UHS
72
Economics
12th Grade
06/01/2009

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Term
Factors of Production
Definition
Includes all of the items that go into the production of a product.  This includes Land, Labor, and Capitol (the tools involved in making the good).
Term
Economic Goals
Definition
Growth, full employment, Efficiency, Price Stability
Term
Types of Economic Systems
Definition

Free- Prices set by supply and demand

Traditional- Based on subsistance farming and providing the bare essentials

Planned-Setup where government determines prices, production levels

Mixed-Some production is done by private sector, others by government

Term
The Invisible Hand
Definition
A metaphor for the principle that when a person acts in their own self interest, they tend to promote the good of the community.
Term
Scarcity
Definition
The limited nature of society's resources
Term
Economics
Definition
The study of how society manages its scarce resources
Term
Oppurtunity Cost
Definition
Whatever must be given up to obtain some item
Term
Market Economy
Definition
An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
Term
Externality
Definition
the impact of one person's actions on the well-being of a bystander
Term
Inflation
Definition
an increase in the overall level of prices in the economy
Term
Microeconomics
Definition
The study of how households and firms make decisions and how they interact in markets
Term
Macroeconomics
Definition
The study of economywide phenomena, including inflation, unemployment, and economic growth
Term
Positive Statements
Definition
Claims that try to describe the world as it is
Term
Normative Statements
Definition
Claims that attempt to prescribe how the world should be
Term
Imports
Definition
Goods and services that are produced abroad and sold domestically
Term
Exports
Definition
goods and services that are produced domestically and sold abroad
Term
Comparative Advantage
Definition
The ability to produce a good at a lower opportunity cost than another producer
Term
Absolute Advantage
Definition
The ability to produce a good using fewer inputs than another producer
Term
Market
Definition
a group of buyers and sellers of a particular good or servece
Term
Substitutes
Definition
two goods for which an increase in the price of one leads to an increase in the demand for the other
Term
complements
Definition
two goods for which an increase in the price of one leads to a decrease in the demand for the other
Term
law of demand
Definition
the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises
Term
law of supply
Definition
the claim thatt, other things equal, the quantity supplied of a good rises when the price of the good rises
Term
Equilibrium
Definition
a situation in which the market price has reached the level at which quantity supplied equals quantity demanded
Term
surplus
Definition
a situation in which quantity supplied is greater then quantity demanded
Term
shortage
Definition
a situation in which quantity demanded is greater than quantity supplied
Term
Elasticity
Definition
a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants
Term
inelasticity
Definition
condition  where a change in price has little to no effect in the demand for a product
Term
total revenue
Definition

 (in a firm)- the amount a firm receives for the sale of its output

(in a market)- the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold

Term
price ceiling
Definition
a legal maximim on the price at which a good can be sold
Term
price floor
Definition
a legal minimum on the price at which a good can be sold
Term
welfare economics
Definition
the study of how the allocation of resources affects economic well-being
Term
consumer surplus
Definition
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
Term
efficiency
Definition
the property of society getting the most it can from its scarce resources
Term
equity
Definition
the property of distributing economic prosperity fairly among the members of a society
Term
deadweight loss
Definition
the fall in total surplus that results from a market distortion, such as a tax
Term
world price
Definition
the price of a good that prevails in the world market for that good
Term
tariff
Definition
a tax on goods produced abroad and sold domestically
Term
positive externality
Definition
externality where the benefits of a decision affect the bystander in a good way
Term
negative externality
Definition
externality in which the effects of a decision negatively impact the bystander
Term
transaction costs
Definition
the costs that parties incur in the process of agreeing to and following through on a bargian
Term
Coase Theorom
Definition
the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own
Term
Public Good
Definition
goods that are neither excludable nor rival in consumption
Term
Free Rider
Definition
a person who receives the benefit of a good but avoids paying for it
Term
Tragedy of the Commons
Definition
a parable that ilustrates why common resources get used more than is desirable from the standpoint of society as a whole
Term
budget defecit
Definition
a shortfall of tax revenue from government spending
Term
VAT (Value Added Tax)
Definition
A tax levied on the difference between the item's price before taxes and its cost of production
Term
marginal tax rate
Definition
the extra taxes pain on an additional dollar of income
Term
benefits principle
Definition
the idea that people should pay taxes based on the benefits they receive from government services
Term
vertical equity
Definition
the idea that taxpayers with a greater ability to pay taxes should pay larger amounts
Term
horizontal equity
Definition
the idea that taxpayers with similar abilities to pay taxes should pay the same amount
Term
regressive tax
Definition
a tax for which high-income tax payers pay a smaller fraction of their income than do low-income taxpayers
Term
progressive tax
Definition
a tax for which high-income taxpayers and low-income taxpayers pay the same fraction of income
Term
lump-sum tax
Definition
a tax that is the same amount for every person
Term
economic profit
Definition
total revenue minus total cost, including both explicit and implicit costs
Term
accounting profit
Definition
total revenue minus total explicit cost
Term
profit
Definition
total revenue minus total cost
Term
fixed costs
Definition
costs that do not vary with the quantity of output
Term
variable costs
Definition
costs that do vary with the quantity of output produced
Term
economies of scale
Definition
the property whereby long-run average total cost falls as the quantity of output increases
Term
competitive market
Definition
a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker
Term
sunk costs
Definition
a cost that has already been committed and cannot be recovered
Term
monopoly
Definition
a firm that is the sole seller of a product without close substitutes
Term
natural monopoly
Definition
a monopoly that arises because a single firm can supply a good or servece to an entire market at a smaller cost than could two or more firms
Term
price discrimination
Definition
the business practice of selling he same good at differenc prices to different customers
Term
oligopoly
Definition
a market structure in which only a few sellers offer similar or identical products
Term
monopolistic competition
Definition
a market structure in which many firms sell products that are similar but not identical
Term
duopoly
Definition
an oligopolic situation in which only two companies produce a product
Term
cartel
Definition
a group of firms acting in unison
Term
game theory
Definition
the study of how people behave in strategic situations
Term
prisoner's dilemma
Definition
a particular "game" between two captured prisoners that illuystrates why cooperation is difficult to maintain even when it is mutually beneficial
Term
OPEC
Definition
Organization of Petrol. Exporting Countries
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