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| the amount of other products that must be forgon or sacrificed to produce a unit of a product |
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| the pleasure, happiness, or satisfaction obtained from consuming a good or service |
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| comparisons of marginal benefits and marginal costs, usually for decision making - common. |
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| observation, hypothesis, test, review of hypothesis, test, etc. until hypothesis becomes theory |
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| a statement about economic behaviour or the economy that enables prediction of the probable effects of certain actions. |
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| other-things-equal assumption |
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| ceteris paribus - factors other than those being considered do not change (only focus on one variable) |
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| examines either the economy as a whole or its basic subdivisions or aggregates, like gov't, household, or business sectors |
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| collection of specific economic units treated as if they were one unit. |
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| examines the individual units such as a person, household, firm, or industry |
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| focuses on facts and cause/effect relationships (scientific-based details) |
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| incorporates value judgements about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal (policy economics) |
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| need to make choices because economic wants exceed economic means |
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| budget constraint - a schedule or curve that shows various combinations of two products a consumer can purchase with a specific money income. |
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| all natural, human, and manufactured resources that go into the production of goods and services. |
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| all natural resources used in the production process (land, forests, mineral, oil, water, etc) |
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| physical and mental talents of individuals used in producing goods and services |
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| (capitol goods) all manufactured aids used in producing consumer goods and services (factory, storage, transportation, and distribution facilities, tools and machinery. |
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| purchase of capital goods |
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| takes the initiative to combine resources, makes all business decisions, innovator, risk bearer (no guarantee of profit) |
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| factors of production (inputs) |
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| economic resources (land, labor, capital, entrepreneurial abilities) |
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| products that satisfy the consumer directly |
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| products that satisfy the consumers wants indirectly |
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| production possibilities curve |
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Definition
| displays the different combinations of goods and services that society can produce in a fully employed economy, assuming a fixed availiability of supplies of resources and constant technology |
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| law of increasing opportunity costs |
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Definition
| as the production of a particular good increases, the opportunity cost of producing an additional unit rises |
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| growth of economic capacity; a total larger output |
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| social science that examines how individuals, institutions, and society make optimal choices under the conditions of scarcity |
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| a particular set of instutional arrangements and a coordinating mechanism |
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| socialism, communism; government owns most property resources and economic decision making occurs through a central economic plan |
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| capitalism; private ownership of resources and the use of markets and prices to coordinate and direct economic activity; based on self-interest |
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| pure capitalism (laissez-faire) |
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Definition
| the governments role is limited to protecting private property and establishing an environment appropriate to the operation of the market system |
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Definition
| the right of private persons and firsm to obtain, own, control, emply, dispose of, adn bequeath land, capital, and other property |
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| ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their goods and services and sell them in their chosen markets |
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| enables owners to employ or dispose of their property and money as they see fit, allows workers to try to enter any line of work they are qualified for, and ensures that consumers are free to buy the goods and services that best satisfy their wants and that their budgets allow |
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| each economic unit tries to achieve its own particular goal - motivating force of the various economic units as they express their free choices |
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| requires (1) two or more buyers and two or more sellers acting independently in a particular product or resource market, (2) freedom of sellers and buyers to enter or leave markets, on the basis of their economic self-interest |
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| institution or mechanism that brings buyers and sellers into contact |
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| use f resources of an individual, firm, region, or nation to produce one or a few goods or services rather than the entire range of goods and services. |
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| any item sellers generally accept and buyers generally use to pay for a good or service; money is used in place of barter |
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| convenient social invention to facilitate exchanges of goods and services |
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| idea that consumers are in command |
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| consumers spend their income on the goods they are most willing and able to buy |
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| creation of new products and production methods completely destroy the market positions of firms that are wedded to existing products and older ways of doing business |
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| the theory that firms and resource suppliers, seeking to further their own self-interest and operating within the framework of a highly competitve market system, will simultaneously promote the public or social interest |
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| illustrates the repetitive flows of goods and services, resources, and money in a dynamic market economy |
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| place where resources or the services of resource suppliers are bought and sold. |
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| the place where goods and services produced by businesses are bought and sold |
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| schedule or curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time |
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| demand over a period of time shown in table form |
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| theory that all else equal, as price falls, the quantity demanded rises, adn as price rises, the quantity demanded falls (inverse relationship) |
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| diminishing partial utility |
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Definition
| theory that each buyer of a product will derive less satisfaction (or benefit, or utility) from each successive unit of the product consumed |
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| theory that a lower price increases the purchasing power of a buyers money income, enabling the buyer to purchase more of the product than before |
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Definition
| theory that at a lower price buyers have the incentive to substitute a less expensive product for similar products that are relatively more expensive |
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| graph measuring quantity demanded (horizonal axis) vs. price (vertical axis) |
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Definition
| factors that can and do affect purchases: (1) consumers tastes/preferences, (2) the number of buyers in the market, (3)consumers incomes, (4)the prices of related goods, and (5)consumer expectations |
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| products whose demand varies directly with money income (aka superior goods) |
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| goods whose demand variew inversly with money income |
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| good that can be used in pllace of another good |
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| good that is used together with another good |
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| shift of the demand curve to the right (increase in demand) or to the left (decrease in demand) |
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| change in quantity demanded |
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Definition
| movement from one point to another point - from one price-quantity combination to another - on a fixed demand schedule or demand curve |
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Definition
| schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period |
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| supply over a period of time shown in table form |
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Definition
| as price rises, the quantity supplied rises; as price falls, the quantity supplied falls (direct relationship) |
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| graph measuring quantity supplied (horizontal axis) vs. price (vertical axis. |
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Definition
| (1) resource prices, (2) technology, (3) taxes and subsidies, (4) prices of other goods, (5) producer expectations, and (6) the number of sellers in the market. |
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Definition
| shift in supply schedule and curve |
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| change in quantity supplied |
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Definition
| movement from one point or another on a fixed supply curve (change in the price of a product) |
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| (market-clearing price) price where the intentions of buyers and sellers match (quantity demanded meets quantity supplied) |
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| excess supply - causes prices to fall |
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| excess demand (causes prices to rise) |
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| the production of any particular good in the least costly way |
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| particular mix of goods and services most highly valued by society (minimum-cost production assumed) |
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| maximum legal price a seller may charge for a product or service |
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| minimum price fixed by the government. |
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