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| production possibilities frontier |
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| curve showing max attainable combinations of 2 products that may be produced w/ available resources |
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| highest valued alternative that must be given up to engage in an activity |
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| ability of economy to produce increasing quantities of goods/services |
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| ability of an individual, firm, or country to produce more of a good/service than competitors using the same amount of resources |
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| ability of an individual, firm, or country to produce a good/service at a lower opportunity cost than other producers |
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| group of buyers/sellers of a good/service and then institution or arrangement by which they come together to trade |
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| markets for goods and services |
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| markets for the factors of production (labor, captiol, natural resources, etc) |
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| model illustrating how participants in markets are linked[image] |
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| market w/ few government restrictions on how a good/service can be produced or sold, or on how a factor of production can be employed |
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| someone who operates a business, bringing together factors of production- labor, capital, and natural resources- to produce goods/services |
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| rights individuals/firms have to the exclusive use of their property, including the right to buy/sell it |
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| amount of good/service that a consumer is willing and able to purchase at a given price |
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| table showing relationship between the price of a product and the quantity of the product demanded |
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| curve that shows relationship between the price of a product and the quantity of the product demanded |
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| demand by all the consumers of a given good/service |
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| holding everything else constant, when price of a product falls, the quantity demanded of the product will increase, and when price of product rises, quantity demanded of product will decrease |
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| change in quantity demanded of a good that results from a change in price making the good more/less expensive relative to other goods that are substitutes |
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| change in the quantity demanded of a good that results from the effect of a change in the good's price on consumer purchasing power |
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| ceteris paribus "all else equal" |
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| requirement that when analyzing the relationship between 2 variables- such as price and quantity demanded- other variables must be held constant |
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| goods and services that can be used for the same purpose |
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| goods that are used together |
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| good for which the demand increases as income rises and decreases as income falls |
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| good for which the demand decreases when income increases and increases when income decreases |
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| characteristics of a pop w/ respect to age, race, and gender |
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| amount of good/service that a firm is willing and able to supply at a given price |
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| table that shows the relationship between the price of a product and the quantity of the product supplied |
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| curve that shows the relationship between the price of a product and the quantity supplied of that product |
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| holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in quantity supplied |
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| change in the ability of a firm to produce a given level of output with a given quantity of inputs |
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| a situation in which quantity demanded=quantity supplied |
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| competitive market equilibrium |
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| market equilibrium with many buyers and many sellers |
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| situation in which the quantity supplied is greater than the quantity demanded |
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| situation where quantity demanded is greater than the quantity supplied |
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| legally determined max price that sellers may charge |
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| legally determined min price sellers can receive for a good |
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| additional benefit to a consumer from consuming one more unit of a good/service |
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| difference between highest price a consumer is willing to pay and the price the consumer actually pays |
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| additional cost to a firm of producing one more unit of a good/service |
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| additional cost to a firm of producing one more unit of a good/service |
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| difference between lowest price firm is willing to accept and the price it actually receives |
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| = consumer surplus + producer surplus |
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| reduction in economic surplus resulting from a market not being in competitive equilibrium |
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| market outcome in which the marginal benefit to consumers of the last unit produced = its marginal cost of production, and in which consumer surplus + producer surplus is at a max |
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| buying and selling at prices that violate gov price regulations |
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| actual division of burden of a tax between buyers and sellers in a market |
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| benefit or cost that affects someone who is not directly involved in the production or consumption of a good/service |
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| the cost borne by the producer of a good/service |
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| the total cost of producing a good, including both the private cost and any external cost |
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| benefit received by the consumer of a good/service |
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| total benefit from consuming a good, including both the private benefit and any external benefit |
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| situations in which the market fails to produce the efficient level of output |
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| rights individuals/businesses have to the exclusive use of their property, including the right to buy/sell it |
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| costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods/services |
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| the argument of economist Ronald Coase that if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities |
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| Pigovian taxes and subsidies |
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| gov taxes ans subsidies intended to bring about an efficient level of output in the presence of externalities |
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| command and control approach |
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| gov-imposed quantitative limits on the amount of pollution firms are allowed to generate, or gov-required installations by firms of specific pollution control devices |
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| situation that occurs when on person's consuming a unit of a good means no one else can consume it |
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| situation where anyone who does not pay for a good cannot consume it |
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| goods that are both rival and excludable |
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| goods that are rival but not excludable |
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| good that's both nonrivalrous and nonexcludable |
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| benefiting from a good w/o paying for it |
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| the tendency for a common resource to be overused |
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| measure of how much one economic variable responds to changes in another economic variable |
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| price elasticity of demand |
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= (% change in quantity demanded of product)/(% change in product's price)
the responsiveness of the quantity demanded to a change in price |
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when % change in quantity demanded > % change in price
price elasticity > 1 |
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when %n change in quantity demanded < %change in price
price elasticity < 1 |
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when %change in quantity demanded = %change in price
price elasticity = 1 |
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| perfectly inelastic demand |
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Definition
| when change in price results in no change in quantity demanded |
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| when change in price results in an infinite change in quantity demanded |
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= (price per unit) x (# of units sold)
total amount of funds received by seller of good/service |
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| cross-price elasticity of demand |
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| (%change in quantity demanded of one good)/(%change in price of another good) |
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| income elasticity of demand |
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= (%change in quantity demanded)/(%change in income)
measure of responsiveness of quantity demanded to changes in income |
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| price elasticity of supply |
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= (%change in quantity supplied of product)/(%change in product's price)
responsiveness of quantity supplied to a change in price |
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