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| The extra cost of producing or doing one more unit. |
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| Something people want because it provides utility. |
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| Something people want to avoid because it creates disutility. |
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| Natural resources used in production (soil, minerals, water, location). |
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| The person who organizes land, labor, and capital, takes risk, and looks for profit. |
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| Pre-Smith view: national wealth comes from gold, exports, and government control of trade. Smith rejected this. |
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| Author of The Wealth of Nations (1776). Argued that self-interest plus competition in free markets can raise living standards through the "invisible hand." |
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| Smith's long-run price covering the costs of land, labor, and capital. Market price gravitates toward it with competition. |
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| People cannot easily be stopped from using the good even if they do not pay. |
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| A cost or benefit that falls on a third party who did not choose it (pollution is a negative externality; a vaccine can create a positive one). |
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| 3 Questions every economy must answer |
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| What to produce? How to produce? For whom to produce? |
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| In Marx's theory, a classless, stateless end stage after socialism, with common ownership. In practice, 20th-century communist states used heavy central planning. |
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| "Let it be." Government should interfere little in markets. |
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| Central decisions about production and allocation instead of market prices (used in command/socialist systems). |
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| Quantity demanded is greater than quantity supplied at the current price. Often caused by a price ceiling. |
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| Carries out and enforces laws (President, Cabinet, federal agencies). |
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| Upper house of Congress; 2 senators per state. Confirms appointments and treaties (advice and consent). |
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| The president's top appointed department heads who help run the executive branch. |
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| Someone who benefits from a good without paying. A main reason public goods are underprovided by markets. |
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| Powers not written word-for-word but inferred as needed to carry out explicit powers (Necessary and Proper Clause). |
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| Interpersonal Utility Comparison |
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| Trying to compare one person's satisfaction with another's. Economists say this is hard or impossible to do scientifically. |
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| Statements about what should be. Value judgments (example: "We should tax the rich more"). |
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| Getting the most value from scarce resources; no waste. Often linked to Pareto optimality. |
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| How to allocate scarce resources among competing wants. |
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| A non-cash opportunity cost (forgone wages, forgone rent on a building you own). |
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| The extra benefit from one more unit. |
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| A scarce good; you must give something up to get more of it. |
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