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Agriculture Economics
Freshman Ag Economics
34
Economics
Undergraduate 1
09/08/2006

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Term
Oppertunity costs
Definition
Oppertunities the individual, firm, or government must forego to make the desired expediture.

What you didn't get through your decision
Term
Comparitave advantage
Definition
Two companies benefit in trade.
Term
Marginal Analysis
Definition
The (sometimes unnoticed) gain or loss.

Ex: If a plane ticket per passenger drops from $300 to $200, there is nor real loss because either way the plane must fly.
Term
Externalities
Definition
External third parties effected by a trade.

Ex: Powerplant (seller) gives power to neighborhood (buyer), but pollution effects fish and fisherman(third party)
Term
Closed Economy
Definition
Exports and Imports make up a small portion of an economy's GDP.

Ex: USA
Term
Correlation
Definition
Two variables which rise or fall together
Term
Economic model
Definition
Representation of a theory used to find cause and effect.
Term
Gross Domestic Product (GDP)
Definition
Measure of an economy's size, the total amount producted within 1 year within an economy's borders.

Ex: Germany producing cars in USA
Term
Economics
Definition
Allocation of scarce recources to unlimited wants. Studies society as a whole at individual level.
Term
Economy
Definition
System of corordinating society's consumption and production activities.
Term
Microeconomics
Definition
Study of the individual's decisions and how those decisions interact.

Ex: Household (consumer) and firms (producer)
Term
Macroeconomics
Definition
Study of whole society's ups and downs in the economy.

Ex: Unemployment, stocks
Term
What are the seven crucial concepts of economics?
Definition
1) How much does it REALLY cost?
ex: oppertunity cost, what you didn't get

2)Attempt to restrict the economy usually backfires.
ex: Price floor/ ceiling

3)Principle of comparative advantage.
ex: basis of trade, everyone should do what they're best at.

4)Trade is a win-win situation.
ex: Both benefit from voluntary trade.

5) Imporance of Analysis at margin
ex: all or nothing (eat or dont), on average decision (daily calorie intake), or marginal decision (how much more to eat)

6) Externalities (neative or positive)
ex: Farmer (producer) sprays fields (consumers buy) but chemicals poison water (drinkers= external)

7)Trade off b/t efficiency and equallity.
ex: handycap parking spaces are not efficient but diasabled are equal.
Term
Gross National Product (GNP)
Definition
Total amount of goods and services produced by citizens in one year.

Ex: Ford cars produced in USA
Term
Exports
Definition
Goods and services produced in your economy and sold to another.
Term
Imports
Definition
Goods and services produced in another economy and and sold here.
Term
Open economy
Definition
Exports and imports make a large portion of the economy's GDP
Term
Boom and expansion
Definition
Rapid increase in prices, growth of product/ ecomomy.
Term
Explain the circular flow diagram
Definition
Households give expenditure (income) to output markets (grocery store) and recieve goods and services. Output markets gives sales reciepts tp firms (general mills) and recieve goods and services. Firms give wages and interests to input markets (oat farm) and receive labor and capital. Input markets give income to households and receive larbor and capital.
Term
Recession
Definition
A slow down in economy
Term
Recources
Definition
Instruments provided bu nature or people to produce goods and services.

Ex: Land, labor, capital
Term
Allocation of recources
Definition
Society's decision to divide scarce recources.
Term
Outputs
Definition
Goods and services produced by a firm
Term
Inputs
Definition
Recources used by a firm to produce outputs.
Term
Efficient
Definition
a firm that does waste any of its available recources and produces max outputs technology allows.
Term
Production possibilities frontier (PPF or curve- PPC)
Definition
Displays various possible combinations of outputs a firm can produce given technology and available recources.

Ex: Any point along the line is efficient, any point within the line is possible but inefficient, any point outside the line is impossible.
Term
Quantity demanded
Definition
Amount if good demanded at a given price.

Movement along this curve is based on price.
Term
What factors shift demand?
Definition
Income, population, consumer preferance, and prices/ availability of goods.
Term
Demand curve
Definition
Displays quantity demanded at each specific price.
Term
Demand schedule
Definition
Lists the quantity demanded of a good at each specific price.
Term
Supply curve
Definition
Displays the supply schedule

Movement along the curve is only due to the price of that good (change in quantity supplied- amount supplied at a given price)
Term
Supply schedule
Definition
Lists the quantity supplied for each specific price
Term
What are supply shifters?
Definition
1) Number of firms (more firms means more supplied)

2) Technological processes (more effiencency means more supply)

3) Prices of inputs (high imput costs means less supply)

4) Prices of related goods
Term
Equlibrium
Definition
The point of the graph when supply is th same as demand, quantity supplied equals quantity demanded.
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