Shared Flashcard Set

Details

Exam 1
Chapters 1-5
113
Economics
Undergraduate 1
10/12/2008

Additional Economics Flashcards

 


 

Cards

Term
Economics
Definition
the study of how people use their scarce resources to satisfy their unlimited wants ($=scarce resource)
Term
resources
Definition
inputs, or factors of production, used to produce the goods and services that people want; resources consist of land, labor, capital, and entrepreneurial ability (human resources)
Term
labor
Definition
the phiscal and mental (new- service society vs industrial) effort used to produce goods and services
Term
capital
Definition
buildings, equipment, and human skill used to produce goods and service
Term
natural resources (land)
Definition
"gifts of nature" used to produce goods and services, includes renewable and exhaustible resources
Term
entrepreneurial ability
Definition
managerial and organization skills needed to start a firm, combined with willingness to take risks
Term
wages
Definition
payment of resources for labor
Term
interest
Definition
payment for use of capital
Term
rent
Definition
payment for use of natural resources
Term
profit
Definition
reward for entrepreneurial ability, revenue from sales minus cost of resources used by the entrepreneur
Term
good
Definition
tangible item used to satisfy human wants
Term
service
Definition
activity (intangible) used to satisfy human wants
Term
scarcity
Definition
occurs when the amount people desire exceeds the amount available at a zero price
Term
market
Definition
set of arrangements through which buyers and sellers carry out exchange and mutually agreeable terms
Term
product market
Definition
good or service is bought or sold (consumers)
Term
resource market
Definition
resource is bought or sold (business/industry)
Term
circular-flow model
Definition
diagram that outlines the flow of resources, products, income, and revenue among economic decision makers
Term
marginal
Definition
incremental, additional, or extra; used to describe a change in an economic variable (1)
Term
microeconomics
Definition
study of economic behavior in particular markets, such as that for computers or unskilled labor
Term
macroeconomics
Definition
study of economic behavior of entire economics
Term
economic theory/model
Definition
simplification of reality used to make predictions about cause and effect in the real world
Term
economy
Definition
system for coordinating socities productive activities
Term
market economy
Definition
production and consumption are the result of decentralized decisions by many firms and individuals, each individual producer makes what he or she thinks will be most profitable; each consumer buys what he or she chooses (opposite = command economy)
Term
variable
Definition
measure, such as a price or quantity, that can take on different values
Term
other-things-constant-assumption
Definition
when focusing on the relation among key variables, other variables remain unchanged
Term
behavior assumption
Definition
describes expected behavior of economic decision makers; what motivates them
Term
hypothesis
Definition
theory about relationships among key variables (forms and tests)
Term
invisible hand
Definition
the way in which the individual pursuit of self-interest can lead to good results for society wholly
Term
microeconomics (book definition)
Definition
studies how people make decisions and how they can intereact (invisible hand = key theme)
Term
macroeconomics (book definition)
Definition
concerned with the overall ups and downs of the economy
Term
individual choice
Definition
decision by an individual of what to do, which necessarily involves a decision of what not to do
Term
resource
Definition
anything that is used to produce something else (land, labor, capital, human capital)
Term
scarce
Definition
quantity of resource isn't large enough to satisfy all productive uses
Term
opportunity cost
Definition
what you must give up in order to get it
Term
trade-off
Definition
when you compare the costs and benefits of doing something
Term
marginal decision
Definition
decisions about whether to do a bit more or a bit less of an activity
Term
marginal analysis
Definition
study of marginal decisions (example: what is an acceptable rate of side effects from a new medicine?)
Term
incentive
Definition
anything that offers rewards to people who change their behavior
Term
interaction
Definition
my choices affect your choices, and vice versa - feature of most economic situations. Results often are different from what individuals intend.
Term
trade
Definition
goods and services are provided and received (market economy). People divide tasks among themselves.
Term
gains from trade
Definition
why we have an economy and not many self-sufficient individuals - people can benefit and get more of what they want
Term
specialization
Definition
each person specializes in one task that he or she is good at performing
Term
equilibrium
Definition
when no individual would be better off doing something different
Term
efficient
Definition
people are better off without making others worse off when taking opportunities, producing the maximum gains from trade possible given the resources available
Term
equity
Definition
everyone gets his or her fair share
Term
positive economic statement
Definition
statement that can be proved or disproved by data/reference to facts
Term
normative economic statement
Definition
statement that represents an opinion that cannot be proved or disproved
Term
association-is-causation fallacy
Definition
the incorrect idea that if two variables are associated in time, one must necessarily cause the other
Term
fallacy of composition
Definition
incorrect belief that what is true for the indiviual or part, must necessarily be true for the group, or whole.
Term
secondary effects
Definition
unintended consequences of economic actions that may develop slowly over time as people react to events
Term
opportunity cost (book)
Definition
the value of the best alternative forgone when an item or activity is chosen
Term
sunk cost
Definition
a cost that has already been incurred in the past, cannot be recovered, and thus is irrelevant for the present and future economic decisions
Term
law of comparative advantage
Definition
individual, firm, region, or country with the lowerst opportunity cost of producing a particular good should specialize in that good (David Ricardo)
Term
absolute advantage
Definition
the ability to produce something using fewer resources than other producers use (Adam Smith)
Term
comparative advantage
Definition
ability to produce something at a lower opportunity cost than other producers face
Term
barter
Definition
the direct exchange of one good for another without using money (then and now) relevance today. not debt.
Term
division of labor
Definition
organizing production of a good into its separate tasks
Term
specialization of labor
Definition
focusing work effort on a particular product or a single tasks
Term
production possibilities frontier
Definition
a curve showing the alternative combinations of goods that can be produced when available resources are used fully and efficiently
Term
efficiency
Definition
the condition that exists when there is no way resources can be reallocated to increase the production of one good without decreasing the production of another good
Term
law of increasing opportunity costs
Definition
to produce each additional increment of a good, a successively larger increment of an alternative good must be sacrificed if the economy's resources are already being used efficiently
Term
economic growth
Definition
an increase in the economy's ability to produce goods and services; an upward shift of the production possibilities frontier
Term
pure capitalism
Definition
an economic system characterized by the private ownership or resources and the use of prices to coordinate economic activity in unregulated markets
Term
mixed system
Definition
economic system charactierized by the private ownership of some resources and the public ownership or others; some markets unregulated and others are regulated (sweden & norway)
Term
pure command system
Definition
economic system characterized by the public ownership of resources and centralized planning - state owns everything
Term
competitive market
Definition
a market in which there are many buyers and many sellers of the same good or service
Term
supply and demand model
Definition
model of how a competitive market works
Term
demand schedule
Definition
how much of a good or service consumers will buy at different prices
Term
demand curve
Definition
graphical representation of the demand schedule
Term
quantity demanded
Definition
the actual amount consumers are willing to buy at some specific price
Term
law of demand
Definition
the higher the price of a good, given all other things equal, the less people will demand for that good
Term
shift in the demand curve
Definition
change in the quantity demanded and any given price, represented by the change of the original demand curve to a new position, denoted by a new demand curve
Term
movement along the demand curve
Definition
the change in the quantity demanded of a good that is the result of a change in that good's price
Term
substitutes
Definition
two goods whose consumption are inversely related in terms of price (either/or)
Term
complements
Definition
two goods whose consumption are directly related in terms of price (movie tickets + popcorn)
Term
normal good
Definition
a good whose demand increases with an increase in income
Term
inferior good
Definition
a good whose demand decreases with an increase in income
Term
quantity supplied
Definition
the actual amount of a good or service people are willing to sell at some specific price
Term
supply schedule
Definition
how much of a good or service producers are willing to supply at a different price
Term
supply schedule
Definition
how much of a good or service producers are willing to suply at a different price
Term
supply curve
Definition
graphical representation of supply schedule
Term
shift in supply curve
Definition
change in quantity supplied of a good or service at any given price. it is represented by the change of the original supply curve to a new position, denoted by a new supply curve
Term
movements along the supply curve
Definition
change in quantity supplied of a good that is the result of a change in that good's price
Term
input
Definition
good produced to produce another good
Term
equilibrium price
Definition
price at which the quanitity supplied equals the quantity demanded
Term
market-clearing price
Definition
another name for equilibrium price
Term
surplus
Definition
quantity supplied of a good exceeds the quantity demanded. this occurs when the price is above the equilibrium level
Term
shortage
Definition
quantity demanded of a good exceeds the quantity supplied. this occurs when the price is below the equilibrium level.
Term
price controls
Definition
legal restrictions of how high/low a market price may go
Term
price ceiling
Definition
max price sellers are allowed to charge for a good
Term
price floor
Definition
min price buyers are required to pay for a good
Term
inefficient market
Definition
exists when there are missed opportunities - ways in which production or consumption could be rearranged that would make some people better off without making other people worse off
Term
inefficient allocation to consumers
Definition
people who want a good and are willing to pay a high price don't get it, and those who care relatively little about the good are only willing to pay a low price to get it
Term
wasted resources
Definition
people who spend money and expend effort in order to deal with the shortages caused by the price ceiling
Term
inefficiently low quality
Definition
sellers offer low-quality goods at a low price even though buyers would prefer better quality at a higer price
Term
black market
Definition
market in which goods or services are bought and sold illegally - either because it is illegal to sell them at all or becaouse the prices charged are legally prohibited by a price ceiling
Term
minimum wage
Definition
legal floor on the wage rate, which is the market price of labor
Term
inefficient allocation of sales among sellers
Definition
those who would be willing to sell the good at the lowest price are not always those who actually manage to sell it caused by price floors
Term
inefficiency high quality
Definition
sellers offer high quality goods at a high price, even though buyers would prefer a lower quality at a lower price
Term
quality control (quota)
Definition
an upper limit on the quantity of some good that can be bought or sold. the total amount of the good that can be legally transacted is the quota limit.
Term
demand price
Definition
the price at which consumers will demand that quantity
Term
supply price
Definition
price at which producers will supply that quantity
Term
excise tax
Definition
tax on sales of a good or service
Term
tax incidence
Definition
measure of who really pays taxes
Term
model
Definition
simplified representation of a real situation that is used ot better understand real-life situations
Term
PPF (book)
Definition
illustrates the trade-offs facing an economy that produces only two goods. It shows the max quantity of one good that can be produced for any given quantity produced of the other.
Term
househould
Definition
person or group of people that share their income
Term
firm
Definition
organization that produces goods and services for sale
Term
markets for goods and services
Definition
firms sell goods and services that they produce to households
Term
factor markets
Definition
place where factors of production occur - firms buy resources that they need to produce
Term
forecast
Definition
simple production of the future - models are especially useful for answering "what if" questions
Term
market-clearing price
Definition
another name for equilibrium price. clears the market by ensuring that every buyer willing to pay that price finds a seller willing to sell at that price
Term
market price
Definition
when sales and purchases tend to converge at a uniform price
Supporting users have an ad free experience!