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| economists assume people are: (3 things) |
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Definition
1-rational
2-respond to incentives
3- make optimal decisions at the margin |
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Definition
| "one who manages the household" |
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| the situation in which unlimited wants exceed the limited resources available to fulfill those wants |
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| the study of the choices people make to attain their goals, given the scarce resources |
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| a simplified version of reality used to analyze real-world economic situations |
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| a group of buyers or sellers of a good or service and the institution or arrangement by which they come together to trade |
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| analysis that involves comparing through marginal benefits and marginal costs |
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| the idea that because of scarcity, producing more of one good or service means producing less of another good or service |
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| the highest valued alternative that must be given up to engage in an activity |
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| type of economy in which the government decides how economic resources will be allocated |
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| centrally planned economy |
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Term
| an economy in which the decisions of households and firms interacting in markets alocate economic resources |
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Term
| an economy in which most economic decisions result from the interaction of buyers and sellers in markets, but in which the government plays a significant role in the allocation of resources |
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Term
| which type of economies are most efficient? |
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| economies based on markets |
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| the situation in which a good or service is produced at the lowest possible cost |
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Definition
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| a state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it |
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Term
| productive efficiency comes from... |
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Definition
| competitors driving down prices |
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Term
| which type of efficiency is explained by "markets producing what consumers want to buy" ex] no more vcr's, dvd players instead |
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Term
| the situation that occurs in markets when both the buyer and seller of a product are made better by the transaction |
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| the fair distribution of economic benefits |
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| economists try to leave ________ decisions to politicians |
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| something measurable that can have different values, such as wages or software programmers |
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Term
| what type of assumptions do economics make about the motives of consumers and firms? |
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Term
| analysis concerned with "what is" |
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| analysis concerned with "what ought to be" |
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| What is positive analysis concerned with? |
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Definition
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Term
| What is normative analysis concerned with? |
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Definition
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Term
| the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices |
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Term
| the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth |
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Term
| unlimited wants, limited resources= |
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Term
| a curve showing the maximum attainable combinations of two products that may be produced with available resources and technology |
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Definition
Production Possibilities Curve
or
Production Possibilities Frontier |
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| What are pies an example of in this sentence. "Maria gives up making 2 pies in order to make 1 cake." |
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| the ability of the economy to produce increasing quantities of goods and services |
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| the act of buying or selling |
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Term
| the ability of an individual, firm, or a country to produce more of a good or service than competitors, using the same amount of resources |
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Term
| the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors |
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Term
| is comparitive advantage or absolute advantage the basis for trading? |
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Term
| markets for goods (such as computers) and services (such as medical treatment) |
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Term
| markets for factors of production, such as labor, capital, natural resources, and entrepreneurial ability |
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Term
| the inputs used to make goods or services |
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Term
| what factor of production includes all types of work, from part-time labor to the work of managers in large corperations |
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| factor of production that refers to physical capital, such as computers and machine tools, that is used to produce other goods |
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| factor of production that includes land, water, oil, iron ore, and other raw materials that are ussed in producing goods |
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| someone who operates a business |
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Term
| factor of production that is the ability to bring together the other factors of production to sucessfully produce and sell goods and services |
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Definition
| entrepreneurial abilities |
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Term
| a model that illustrates how participants in a market are linked |
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Definition
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Term
| a market with few government restrictions on how a good or service can be produced or sold or on how factor of production can be employed |
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Term
| adam smith said that firms will be lead by _____________ to provide consumers with what they want |
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Term
| the rights individuals or firms have to the exlusive use of their property, including the rights to buy or sell it |
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Definition
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Term
| a market in which there are many buyers and sellers, all the products are identical, everyone has perfect and complete information, and there are no barriers to entry or exit. |
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Definition
| perfectly competitve market |
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Term
| does a perfectly competitive market exist? |
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Definition
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Term
| a table showing the relationship between the price of a product and the quantity of the product demanded |
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Term
| the amount of a good or service that a consumer is willing and able to purchase at a given price |
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Term
| curve that shows the relationship between the price of a product and the quantity of the product demanded |
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Definition
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Term
| what type of relationship does price have with the quantity demanded of a good |
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Definition
| inverse; price goes UP, quantity demanded goes DOWN |
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Term
| the demand by all the consumers of a given good or service |
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Definition
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Term
| the rule that, holding everything else constant, when the price of a product falls, the quantity demanded of that product will increase, and when the price of a product raises, the quantity demanded of that product will decrease |
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Term
| the change in the quantity demanded of a good that results ifrom a change in price, making the good more or less expensive relative to other goods that are substitutes |
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| the change in the quantity demanded of a good that results from the effect of a change in the good's price on consumers' purchasing power. (like a "pay raise" figuratively) |
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Definition
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Term
| A shift in the demand curve is an increase or decrease in ______________ |
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Term
| a movemtn along the demand curve is an increase or decrease in ______________ |
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Term
| Does price make the demand curve shift? |
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Term
| What five things make the demand curve shift? |
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Definition
1- income
2- price of related goods
3- tastes
4- population&demographics
5- expected future prices |
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Term
| a good for which the demand increases as income rises and decreases as income falls ex)steak |
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Term
| a good for which the demand increases as income falls and decreases as income rises ex)ramen noodles |
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| goods or services that can be used for the same purpose (equal in your mind) ex)coke&pepsi |
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| goods or services that are used together ex)spaghetti&sauce |
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Term
| increase of price of subsitute will make the demand increase or decrease for a good |
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Term
| increased price of a complement will increase or decrease demand for the good |
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Term
| examples of why Taste shifts the demand curve? |
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Definition
Trends, fads.
-iPhone.. everyone wanted it when it came out, because it was the new hip thing |
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Term
| Which reason for shift of the demand curve is explained by: Healthcare demand increased because the babyboomers are getting older. |
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Definition
| population and demographics |
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Term
| consumers choose when to buy a product because the price may increase or decrease in the future |
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Definition
| expected future prices. -If it is going on sale tomorrow the demand for today will decrease and the demand for tomorrow will increase |
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Term
| the amount of a good or service that a firm is willing and able to supply at a given price |
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Definition
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Term
| curve that shows the relationship between the price of a product and the quantity of the product supplied |
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Definition
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Term
| a table that shows the relationship between the price of a product and the quantity of the product supplied |
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Definition
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Term
| what type of relationship do the price of a product and the quantity supplied of a product have? |
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Definition
| direct- when price goes UP, quantity supplied goes UP |
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Term
| the rule that, holding everything else constasnt, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied |
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Definition
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Term
| what 5 things shift the supply curve? |
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Definition
1- Input price
2- Technological change
3- price of substitutes in production
4- number of firms
5- expected future price |
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Term
| if imput price rises (like paying a worker more) what will happen to supply |
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Definition
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Term
| if input price decreases (pay workers less) what will happen to supply? |
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Definition
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Term
| if technological change occurs and productivity increases what will happen to supply? |
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Definition
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Term
| what type of relationship do supply and technological change have? |
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Definition
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Term
| what type of relationship do supply and input price have? |
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Definition
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Term
| if the number of firms in a market increases what will happen to supply |
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Definition
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Term
| what type of relationship do supply and number of firms have |
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Definition
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Term
| if the price of a firms subsitute goes up what happens to the supply of the other good |
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Definition
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Term
| what type of relationship do supply and price of substitutes in production have? |
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Definition
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Term
| what type of relationship do supply and expected future prices have? |
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Definition
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Term
| if expected future price is increased what will happen to supply today |
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Definition
| decrease in supply (so consumers will have to buy product when it is more expensive) |
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Term
| a situation in which quantity demanded equals quantity supplied |
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Definition
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Term
| a market equilibrium with many buyers and many sellers |
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Definition
| competitive market eqilibrium |
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Term
| a situation in which the quantity supplied is greater than the quanity demanded |
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Definition
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Term
| a situation in which the quantity demanded is greater than the quantity supplied |
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Term
| a legally determined maximum price that sellers may charge |
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Definition
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Term
| who do price cielings help? |
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Definition
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Term
| a legally determined minimum price that sellers may receive |
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Definition
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Term
| who do price floors help? |
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Definition
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Term
| what are two price controls? |
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Definition
price floors
price cielings |
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Term
| If minimum wage increases from $9 to $15 and your wage at the time was $12, what type of price floor is this? |
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Definition
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Term
| If your wage is $12 and the minimum wage increases from $9 to $10, what type of price floor does this represent? |
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Definition
| non-binding because it doesnt effect you |
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Term
| the difference between the highest price a consumer is willing to pay and the price the consumer actually pays |
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Definition
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Term
| the additional benefit to a consumer from consuming one more unity of a good or service |
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Definition
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Term
| will a drop in price increase or decrease consumer surplus? |
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Definition
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Term
| the additional cost to a firm of producing one more unit of a good or service |
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Definition
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Term
| the difference between the lowest price a firm would have been willing to accept and the price it actually receives |
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Definition
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Term
| will a drop in price increase or decrease producer surplus |
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Definition
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Term
| what measures the net benefit to consumers from participating in a market, rather than the total benefit |
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Definition
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Term
| what measures the net benefit recieved by producers from participating in a market, rather than the total benefit |
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Term
| marginal benefit = _____________ in a competitive equilibrium |
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Term
| the sum of consumer surplus and producer surplus |
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Term
| the reduction in economic surplus resulting from a market not being in competitive eqilibrium |
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Definition
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Term
| a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which the sum of consumer surplus and producer surplus is at the maximum |
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Term
| a market in which buying and selling take place at prices that violate government price regulations |
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