Term
|
Definition
| The study of how scarce resources and factors of production are allocated to satisfy unlimited wants. |
|
|
Term
|
Definition
1. Land.
2. Labor.
3. Capital.
4. Entreprenurial Spirit. |
|
|
Term
|
Definition
| How much you have to give up of your next best alternative to get more of something. |
|
|
Term
|
Definition
Taxes-Make you buy less because you don't want to pay more.
Subsidies-you get more because you want the government to give you money.(farm subsidies) |
|
|
Term
|
Definition
Scottish enlightenment--"Wealth of Nations" 1776.
2 ideas: division of labor and invisible hand of the market. |
|
|
Term
| Production Possibilities Frontier |
|
Definition
| PPF has a negative slope, implying tradeoffs: to produce more of A, you have to move factors of production and make less of B. |
|
|
Term
|
Definition
| You can produce more with the same inputs than another entity. |
|
|
Term
| Law of Comparitive Advantage |
|
Definition
| By specializing in the good for which a country has the comparative advantage (lower opp. costs), countries can engage in mutually beneficial trade. |
|
|
Term
| Terms of trade for mutual benefit: |
|
Definition
Price must be between opporutunity costs.
If parties have the same opp costs, there can't be benefit from trade. |
|
|
Term
| Why are price and quantity demanded in an inverse relationship? |
|
Definition
Income effect- the more expensive a good is, the less income you have to buy it with.
Substitution- shifting between two products depending on price. |
|
|
Term
| Law of diminishing marginal utility |
|
Definition
| Utility goes up by smaller amounts with consumption of each extra unit. |
|
|
Term
|
Definition
Change in utility/change in quantity consumed.
As you consume additional units, you gain additional utility. |
|
|
Term
|
Definition
Goods that work together.
(Cars and Tires) |
|
|
Term
| 5 causes for shifts in demand |
|
Definition
Income (Normal vs Inferior goods).
Related goods (sustitiutes).
Tastes.
Expectations.
# of Buyers. |
|
|
Term
| 4 causes of shifts in supply |
|
Definition
Input Price.
Technology.
Expectations.
# of Suppliers. |
|
|
Term
|
Definition
Where quantity demanded equals quantity supplied.
Where the supply and demand curves intersect. |
|
|
Term
|
Definition
Too much supply, not enough demand.
Price will be bid down to sell inventory. |
|
|
Term
|
Definition
Not enough supply, too much demand.
Price will go up and consumers that want the good most will buy it. |
|
|
Term
| Determinants of Elasticity |
|
Definition
1. The more substitutes, the more elasticity.
2. The greater the portion of your income is spent, the more elastic.
3. The more time considered, the more elastic the product becomes.
4. The larger the market, the more elastic. |
|
|
Term
|
Definition
| Measure of responsiveness of q demanded or q supplied to one of its determinants. |
|
|
Term
| Price elasticity of demand |
|
Definition
| how much q demanded changes in response to change in price |
|
|
