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| study of how society manages scare resources |
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| land, labor, capital, output of goods and services |
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the limited nature of society's resources --> forces us to manage resources |
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| property of society getting the most out of scarce resources |
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| the property of distributing economic prosperity farily among members of society |
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| COST OF something is what you have to give up to get it |
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| whatever must be given up to obtain some item |
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| Rational People think at the margin |
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| small incremental adjustment to a plan of action |
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| People resond to incentives |
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| trade can make everyone better off |
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Production Possibility Frontier PPF |
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| graph that shows all posible cominations of output that the economy can possibly produce given the available of production/resources and technology |
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| When PPF moves to the left/ right |
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| loss of resources/ gain resources |
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self sufficiency- produce all goods and services on your own trade- economics specialize, exchange goods |
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| ability to produce a good using fewer inputs than another producer |
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| ability to produce a good at a lower opp cost than another producer |
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| calculated by using inputs |
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group of buyers and sellers of a particular good or service demand- buyers supply-sellers |
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describes the relationship or price and quantity demand has negative relationship btwn price and quantity |
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| demand for all people participating in a market |
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| Increase in Demand- What does curve do |
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| decrease in demand- what does curve do? |
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| What causes demand to change? |
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Substitutes-2 goods for which an increase in the price of one good leads to increase of demand in the other Complements- 2 goods for which an increase in price of a good leads to a decrease in demand of the other good Income Number of buyers Tastes Expectations
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| a good in which an increase in income leads to increase in demand |
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a good in which an increase in income leads to a decrease in demand Ex. Ramen noodles |
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price of related goods income number of buyers tastes expectations |
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an increase in price increases quantity supplied and a decrease in price decreases quantity supplied ONLY factor that causes change in QUANTITY SUPPLIED is price |
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| Increase in supply- what does the curve do? |
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| decrease in supply- what does curve do? |
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what causes supply to shift? (PESTO) |
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Price of inputs expectations number of sellers technological inovasions other (weather) |
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| a situatuation in which market price has reached a level where quantity supplied equals quantity demanded |
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| units of goods not sold (when price is higher than equilibrium price) |
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| when quantity demanded is greater than quanitity supplied |
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| measure of responsiveness of quantity demanded/supplied to one of its determinants (price, income) |
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| very responsive to change in price/income |
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| not responsive to changes in price/income |
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availability of close substitues Time horizon necessity vs. luxury definition of a market |
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| Elasticity price demand equation |
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| Epd= % change Q/ % change P |
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| Income elasticity of demand |
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| a measure of how much quantity demanded changes in response to a change in income |
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| income elasticity equation |
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| positive income elasticity |
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| a measure of how much quantity demanded of one good changes in response to a price change in another good |
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| Ec-p= %change Qgood1/ %change Pgood2 |
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| Price elasticity of Supply |
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| measures the responsiveness of quantity supplied to changes in price |
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| determinants of elasticity to supply |
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Time Horizon- shorter vs. longer Type of Good- manufactured vs. beach front prop |
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| Supply Elasticity Equation |
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| Es= %change Qsupplied/ %change P |
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