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| The physical and mental effort used to produce goods and services. |
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| The buildings, equipment and human skills used to produce goods and services |
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| Occurs when the amount people desire exceeds the amount available. |
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| Each individual pursuing his or her own self interest is pursuing societies interest. |
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| Marginal Cost Vs. Marginal Benifit |
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Definition
| Marginal Benefit/Marginal Cost |
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| Characteristics of pure capitalism |
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Definition
Private ownership of resources.
The use of prices to coordinate economic activity in unregulated markets. |
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| The value of the best alternative forgone when an item or activity is chosen. |
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| Law of Comparative Advantage |
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Definition
| The individual firm, region, or country with the lowest opportunity cost of producing a particular good should specialize in that good. |
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| What to produce. How to produce it. For whom to produce. |
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| The satisfaction received from consumption; sense of well being. |
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| A legal limit on the quantity of a particular product that can be imported. |
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| The quantity of a good that consumers are willing and able to buy per period relates inversely to the price, other things constant. |
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| A curve showing the relation between the price of a good and the quantity consumers are willing and able to buy per period, other things constant. |
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| The ability to make something using fewer resources than other producers use. |
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| The ability to make something at a lower opportunity cost than other producers face. |
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| The direct exchange of one good for another without using money |
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| Production Possibilities Frontier (PPF) |
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Definition
| A curve showing alternative combinations of goods that can be produced when available resources are used efficiently; a boundary line between inefficient and unattainable combinations. |
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| An economic system characterized by the public ownership of resources and centralized planning. |
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| A sole supplier of a product with no close substitutes. |
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| The cost or a benefit that affects neither the buyer or seller, but instead affects people not involved in the market transaction. |
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Definition
| A relation between the price of a good and the quantity that consumers are willing and able to buy per period, other things constant. |
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Definition
| A relation between the price of a good and the quantity that producers are willing and able to sell per period, other things constant |
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| At a given price, the amount by which quantity supplied exceeds quantity demanded; a surplus usually forces the price down. |
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| At a given price, the amount by which quantity demanded exceeds quantity supplied; a shortage usually forces the prices up. |
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| The condition that exists in a market when the plans of buyers match those of sellers, so quantity demanded equals quantity supplied and the market clears. |
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| A minimum legal price below which a product cannot be sold; to have an impact, a price floor must be set above the equilibrium price. |
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| A maximum legal price above which a product cannot be sold; to have an impact, a price ceiling must be set below the equilibrium price. |
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| Price Elasticity of Demand Formula |
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Definition
| Percentage change in quantity demanded/percentage change in price. |
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Definition
| A change in price has little effect on quantity demanded. The percentage change in quantity demanded is less than the percentage change in price; the resulting price elasticity is less then 1. |
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Definition
| A change in price has large effect on quantity demanded; the quantity demanded exceeds the percentage change in price; the resulting price elasticity is greater than 1. |
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Definition
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Term
| Price Elasticity of Supply Formula |
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Definition
| Percentage change in quantity supplied/ percentage change in price |
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