Term
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Definition
| the limited nature of society's resources, this is why all the goods and services people wish to have cannot all be be produced |
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Term
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Definition
| the study of how society manages its scarce resources |
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Term
| The Ten Principles of Economics |
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Definition
How People Make Decisions
1. People Face Trade Offs
2. The Cost of Something is What You Give Up to Get it
3. Rational People Think at the Margin
How People Interact
4. People Respond to Incentives
5. Trade Can make Everyone Better Off
6. Markets are Usually a Good Way to Organize Economic Activity
7. Government Can Sometimes Improve Market Outcomes
How the Economy as a Whole Works
8. A Country's Standard of Living Depends on Its Ability to Produce Goods and Services
9. Prices Rise When the Government Prints Too Much Money
10. Society Faces a Short-Run Trade-Off Between Inflation and Unemployment |
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Term
| 1. People Face Trade-Offs |
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Definition
| making decisions requires trading off one goal against another |
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Definition
| getting the maximum benefits from scarce resources |
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Definition
| uniformly distributed benefits among society's members |
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Term
| 2. The Cost of Something is What You Give Up to Get it |
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Definition
| The Cost of Something is What You Give Up to Get it |
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Term
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Definition
| whatever must be given up to obtain some item |
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Term
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| people who systematically and purposefully do the best they can to achieve their objectives, given the available opportunities |
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Term
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Definition
| a small incremental adjustment to an existing plan of action |
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Term
| 3. Rational People Think at the Margin |
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Definition
| rational people often make decisions by comparing marginal benefits and marginal costs |
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Term
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Definition
| something that induces a person to act |
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Term
| 4. People Respond to Incentives |
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Definition
| because rational people make decisions by comparing costs and benefits, they respond to incentives |
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Term
| 5. Trade Can make Everyone Better Off |
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Definition
| trade allows each person to specialize in the activities he or she does best, by trading with others people can buy a greater variety of goods and services at a lower cost |
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Term
| 6. Markets are Usually a Good Way to Organize Economic Activity |
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Definition
| market economies have proven successful in organizing economic activity to promote overall economic well-being |
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Term
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Definition
| an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services |
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Term
| 7. Government Can Sometimes Improve Market Outcomes |
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Definition
if the government:
- enforces rules that maintain the institutions key to a market economy
- promotes efficiency and/or equality |
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Term
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Definition
| the ability of an individual to own and exercise control over scarce resources |
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Term
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Definition
| when the market on its own fails to produce an efficient allocation of its resources |
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Term
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Definition
| the impact of one person's actions on the well-being of a bystander |
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Term
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Definition
| the ability of a single economic person or group having a substantial influence on market prices |
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Term
| 8. A Country's Standard of Living Depends on Its Ability to Produce Goods and Services |
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Definition
in nations where workers can produce a large quantity of goods and services per unit of time, most people endure people enjoy a high standard of living; in nations where workers less productive, most people endure a more meager existence
the growth rate of a nation's productivity determines the growth rate of its average income |
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Term
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Definition
| the quantity of goods and services produced from each unit of labor input |
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Term
| 9. Prices Rise When the Government Prints Too Much Money |
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Definition
| Prices Rise When the Government Prints Too Much Money |
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Term
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Definition
| an increase in the overall level of prices in the economy |
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Term
| 10. Society Faces a Short-Run Trade-Off Between Inflation and Unemployment |
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Definition
because:
- increasing the amount of money in the economy stimulates the overall level of spending and thus the demand for goods and services
- higher demand may over time cause firms to raise their prices, but in the meantime, it also encourages them hire more workers and produce a larger quantity of goods and services
- more hiring means lower unemployment |
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Term
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Definition
| the irregular and unpredictable fluctuations in economic activity |
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Term
| The economist as scientist |
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Definition
- The Scientific Method: observation, theory, and more observation (experiments are basically impossible to perform)
- they make assumptions to simplify a situation
- they use models composed of diagrams and equations to learn about the world |
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Term
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Definition
a visual model of the economy that shows how dollars flow through markets among households and firms
[image] |
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Term
| Production Possibilities Frontier (PPF) |
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Definition
a graph showing the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
[image]
- points on the line are said to efficient, there is no way of producing more than one good without producing less of the other
- points outside the line are impossible to produce because its outside of the available resources
- points underneath the line are said to be inefficient, production is occurring less than what it could be producing at
- steep slopes correlate to high opportunity costs |
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Term
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Definition
| the study of how households and firms make decisions and how they interact in markerts |
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Term
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Definition
| the study of economy-wide phenomena, including inflation, unemployment, and economic growth |
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| the economist as policy adviser |
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Definition
- doesn't always have a straight-forward answer
- advice isn't always followed because sometimes it is too difficult to put fourth the plan |
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Term
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Definition
| claims that attempt to describe the world as it is |
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Term
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Definition
| claims that attempt to describe how the world should be |
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Definition
- the validity of alternative positive theories about how the world works may be different
- different values and different normative views |
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Term
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Definition
- price vs quantity
- when a variable that is not on either axis changes, the curve shifts
- usually have a negative slope |
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Term
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Definition
| the ability to produce more goods using fewer inputs |
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Term
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Definition
| the ability to produce more goods with a lower opportunity cost |
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Term
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Definition
| a group of buyers and sellers of a particular service |
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Term
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Definition
| a market where there are many buyers and sellers so that each has a negligible impact on the market price |
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Term
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Definition
| the amount of a good that buyers are willing to purchase |
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Term
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Definition
| when the price of a good rises the quantity demand falls and vice versa |
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Term
| demand/supply schedule/curve |
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Definition
| schedule is a table of price vs quantity and curve is a graph |
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Term
| most important factors that can shift a demand curve |
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Definition
| income, prices of related goods, tastes, expectations, number of buyers |
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Term
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Definition
| when income increase for normal the demand increase and for inferior the demand decreases |
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Term
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Definition
| the amount of good that sellers are willing to sell |
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Term
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Definition
| the quantity supplied of a good rises when the price rises and vice versa |
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Term
| most important factors that can shift a supply curve |
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Definition
| input prices, technology, expectations, number of sellers |
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Term
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Definition
| a situation in which the market price has reached the level at which the quantity supplied equals quantity demanded |
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Term
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Definition
| when quantity supplied is greater than quantity demanded |
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Term
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Definition
| when quantity supplied is less than quantity demanded |
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Term
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Definition
| the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance |
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Term
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Definition
| a measure of the responsiveness of quantity demanded or quantity supplied to a change in one of the its determinants |
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Term
| price elasticity of demand |
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Definition
| = percentaged change in quantity demanded/ percentage change in price |
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Term
| midpoint method for calculating elasticity |
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Definition
| between two points: = [(q2-q1)/(avg q)]/[(p2-p1)/(avg p)] |
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Term
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Definition
| the amount paid by buyers and received by sellers of a good computed as PQ |
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Term
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Definition
-when demand is inelastic, price and total revenue move in the same direction
-when demand is elastic, price and total revenue
-when demand is unit elastic, price and total revenue remain constant |
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Term
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Definition
| the manner in which the burden of a tax is shared among participants in a market |
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Term
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Definition
-when a tax is put on a good, the equilibrium quantity falls for that good
-buyers pay more and sellers receive less
-most of the burden falls on the side of the market that is less elastic because it responds less easily to the tax change |
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Term
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Definition
| the study of how the allocation of resources affects economic well-being |
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