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Economics
Chapters 1-8
74
Economics
Undergraduate 2
09/11/2012

Additional Economics Flashcards

 


 

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Term
Scarcity
Definition
limited resources and therefore cannot produce all the goods and services people wish to have
Term
economics
Definition
study of how society manages its scarce resources
Term
efficiency
Definition
property of society getting the most it can from its scarce resources
Term
equality
Definition
those benefits are distributed uniformly among societys members
Term
opportuniity cost
Definition
whatever must be given up to otain some item
Term
rational people
Definition
people who systematically and purposefully do the best they can to achive their objectices
Term
marginal change
Definition
a small incremental adjustment to a plan of action
Term

incentive

 

Definition
something that induces a person to act
Term
market economy
Definition
an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
Term
property rights
Definition
ability of an individual to own and exercixe control over scarce resources
Term
market power
Definition
ability of a single economic actor to have a sustantial influence on market prices
Term
productivity the quantity of goods and services produced from each unit of labor input
Definition
Term
inflation
Definition
an increase in the overall level of prices in the economy
Term
circular flow diagram
Definition
visual model of the economy that shows how dollars flow through the markets among households and firms
Term
factors of production
Definition
labor, land, and captial
Term
production possiblities frontier (ppf)
Definition
graph that shows the combinations of output that the economy can possibly produce fiven the available factors of production and the available production technology and resources
Term
Law of Supply
Definition
as price increases quantity supplied increases
Term
Law of Demand
Definition
as price increases quantity Demand decreases
Term
Microeconomics
Definition
study of how households and firms make decisions and how they interact in markets
Term
Macroeconomics
Definition
study of economy wide phenomena including inflation unemployment and economic growth
Term
positive statement
Definition
claims that attempt to describe the world as it is
Term
normative statment
Definition
claims that attempt to prescribe how the world should be
Term
market
Definition
group of buyers and sellers of a particular good or service
Term
competitive market
Definition
market in which there are many buyers and many sellers so that each has negligible impact on the market price
Term
quantity demanded
Definition
amount of a good that buyers are willing and able to purchase
Term
Law of Demand
Definition
other things equal the quantity demanded of a good falls when the price of the good rises
Term
Demand schedule
Definition
table that shows the relationship between the price of a good and the quantity demanded
Term
Demand Curve
Definition
graph of the relationship betweem the price of a good and the quantity demanded
Term
normal good
Definition
good for which other things equal an increase in income leads to an increase in demand
Term
inferior good
Definition
a good for which other things equal an increase in income leads to a decrease in demand
Term
substitutes
Definition
two goods for which an increase in the price of one leads in the demand for the other
Term
complements
Definition
two goods for which increase in the price of one leads to a decrease in the demand for the other
Term
quantity supplied
Definition
amt of a good that sellers are willing and able to sell
Term
Law of Supply
Definition
other things equal the quantity supplied of a good rises when the price of the good rises
Term
Supply schedule
Definition
table showing relationship btwn the price of good and quantit supplied
Term
supply curve
Definition
graph of relationship btwn the price of a good and the quantity supplied
Term
Shifts the Supply curve
Definition
input prices, technology, expectations, # of sellers
Term
equilibrium price
Definition
price that balances quantity supplied and quantity demanded
Term
equilibrum quantity
Definition
quantity supplied and quantity demanded at equlilibrum price
Term
surplus
Definition
situation when quantity supplied is greater than quantity demanded
Term
total revenue
Definition
amt paid by burs and recieved by sellers of a good, computed as the price of the good times the quantity sold
Term
elastic
Definition
if quantity demanded responds only substantially to changes in price
Term
inelastic
Definition
if the quantity demanded responds only slightly to changes in price
Term
income elasticity of Demand
Definition
measure of how much the quantity demanded of a good responds to a change in comsumers income computed as the % change in quantity demanded divided by the % change in income
Term
cross price elasticity of Demand
Definition
measure of how much quantity demanded of one good responds to a change in the price of another good computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of 2nd good
Term
price elasticity of Supply
Definition
measure of how much the quantity supplied of a good responds to a change in quantity supplied divided by the percentage change in price
Term

welfare economics

 

Definition
study of how the allocatino of resources affects economic well-being
Term
willingness to pay
Definition
max amount that a buyer will pay for a good
Term
consumer surplus
Definition
amt a buyer is willing to pay for a good minus the ant actual paid for
Term
cost
Definition
value of everything a seller must give up to produce a good
Term
producer surplus
Definition
the amount a seller is paid for a good minus the sellers cost of providing it
Term
efficiency
Definition
the property of a resource allocation of maximizing the total surplus received by all members of socitey
Term
equality
Definition
the property of distributing economic prsperity uniformly amonh the members of soceity
Term
price ceiling
Definition
a legal maximum on the price at which a good can be sold
Term
price floor
Definition
a legal mimimum on the price at which a good can be sold
Term
tax incidence
Definition
the manner in which the burdern of a tac is shared among participants in a market
Term
deadweightloss
Definition
the fall in total surplus that results from a market distortion, such as tax
Term
externality
Definition

uncompensated impact of one persons acrions on the well-being of a bystander

 

positive externality is when its benefical

 

negative externality is when the impact on the bystander is adverse

Term
internalizing the externality
Definition
gives buyers and sellers in the market an incentive to take into account the external effects if their actions
Term
corrective taxes
Definition
 tax designed to induce private decision makers to take account of the social costs that arise from a negative externatlity
Term
industrial policy
Definition
government intervention in the economy that aims to promote technology-enhancing industries
Term
corrective tax
Definition
a tax designed to induce private decision makers to take account of the social costs that arise from a negative externality
Term
Coase theorem
Definition
the proposition that if private parties can bargain without cost over the allocation of resouces they can solve the problem of externalities on their own
Term
transaction cost
Definition
cost that parties incur in the process of agreeing to and following through on a bargain
Term
rivarly in consumption
Definition
the property of a good whereby one person's use dimishes other people's use
Term
private goods
Definition
goods that are both excludable and rival in cosumption
Term
private goods
Definition
goods that are both excludable and rival in consumption
Term
public goods
Definition
goods that are neither exludable nor rival in consumption
Term
common resources
Definition
goods that are rival in consumption but not excludable
Term
club goods
Definition
goods that are excluable but not rival in consumption
Term
free rider
Definition
a person who receives the benefit of a good but avoids paying for it
Term
cost-benefit analysis
Definition
a study that compares the costs and benefits to society of providing a public good
Term
Tragedy of the Commons
Definition
a parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole
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