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Definition
| Rewards for engaging in a particular activity |
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| a framework to analyze solutions to economic problems |
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the study of how people allocate their limited resources to satisfy unlimited wants
-the study of how people make choices |
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| things used to produce goods & services to satisfy people's wants |
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| What people would buy if their incomes were unlimited |
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| Study of decision making by individuals |
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| Study of the behavior of the economy as a whole |
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| totals (such as total output) |
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| that individuals act as if motivated by self interest and respond predictably to opportunity for gain |
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| People don't intentionally make choices that would leave them worse off |
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the pursuit of one's goals
-doesn;t always mean increasing one's wealth |
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| simplified representations of the real world used as a basis for predictions or explanations |
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| set of circumstances in which a model is applicable |
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| Economic models attempt to... |
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Definition
| focus on what is relevant to a problem @ hand and omit what is not |
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| Ceteris Paribus Assumption |
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Definition
Nothing changes except factor or factors being studied
"other things equal/constant" |
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| Economics is a _________ science. |
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Definition
| Empirical (real world data evaluate a model's usefulness |
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Definition
| A model is good if it predicts economic phenomena |
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| Economics models _______, not ________ |
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Definition
| behavior, though processes |
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| Bounded rationality hypothesis |
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Definition
| people are nearly, not fully, rational (rule of thumb) |
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| Purely descriptive statements or scientific predictions |
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| Analysis involving value judgements |
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| occurs when the ingredients for producing things people desire are insufficient to satisfy all wants |
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A shortage
the same as poverty |
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Definition
| Any activity that results in the conversion of resources into products that can be used in consumption |
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| Resources or Factors of Production |
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Definition
| Inputs that are used to produce things people want |
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Definition
| All natural resources or gifts from nature |
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| Productive contributions of working humans "human resource" |
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| All manufactured resources |
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| Accumulated training and education of workers |
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| person who organizes, manages, and assembles the other resources |
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| All things from which individuals get satisfaction or happiness |
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| goods that are scarce - Quantity demanded exceeds quantity supplied at zero price |
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| tasks that are performed for someone else |
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| Not definable to economists |
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Definition
| The highest valued, next best alternative that must be sacrificed to obtain something or satisfy a want |
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Term
| In economics cost is always a _________. |
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Definition
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Term
| What does the Production Possibilities Curve represent? |
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Definition
| All possible maximum combinations of total output that could be produced |
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Term
| The PPC (PPF) is used to demonstrate |
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Definition
| the related concepts of scarcity, choice, and trade-off |
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Definition
| society's pod of applied knowledge concerning how goods and services can be produced |
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Definition
| a given level of inputs is used to produce the maximum amount possible |
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Definition
| any point below the PPc at which the used resources is not generating the max possible output |
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Term
| Law of Increasing Relative Cost |
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Definition
| As society attempts to produce more of a good, the opportunity cost of additional units of that good generally increases (curved shape of PPC) |
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Term
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Definition
-increases production possibilities
- occurs over a period of time
- is illustrated by outward shift in PPC |
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Definition
| the use of goods and services for personal satisfaction |
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| goods produced for personal satisfaction (food, clothes) |
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| goods we use to produce other goods |
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| organization of economic activity among different individuals and regions |
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| Specialization usually leads to ______________. |
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Definition
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Definition
| the ability to produce a good or service at a lower opportunity cost (relative) |
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| the ability to produce more units of a good or service using a given quantity of labor and resource inputs |
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| choose their comparative advantage or specialize |
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| assigning different workers different tasks to produce a good or service |
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| arrangements individuals have for exchange with one another |
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| schedule showing how much of a good or service people will buy at any price during specified time period, other things constant |
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Definition
| Quantity demanded is inversely related to price |
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Definition
| price of a community in terms of another community |
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Definition
| price we observe today in today's dollars |
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Definition
| table related to quantity demanded |
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Definition
| graphical representation of the demand schedule |
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Definition
| The demand of all consumers in the market place for a particular good or service |
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| Factor other than price changes on demand curve |
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Definition
| shifting curve left or right |
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Term
| Ceteris Paribus Conditions |
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Definition
| determinants of the relationship between P and Q that are unchanged along a curve |
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Definition
| demand (up) when income (up) |
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Definition
| demand (down) when income (up) |
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Definition
| a change in the price of one causes a shift in demand for the other in the same direction as the price change |
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Definition
| a change in the price of one causes a shift in demand for the other in the opposite direction as the price changes |
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Definition
| schedule showing relationship between price and quantity supplied for a specified time period, other things constant |
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Definition
| Quantity of supply is directly related to price |
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Definition
| table relating prices to quantity supplied at each price |
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Definition
| graphical representation of the supply schedule |
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Term
| What causes a change in supply |
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Definition
| a change in one or more of the non-price determinants |
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Term
| Market Clearing (Equilibrium) Price |
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Definition
| Price that clears market (curves intersect) |
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Definition
| situation when Qd=Qs at a particular point |
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Definition
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Definition
| An economic system in which relative prices are constantly changing to reflect changes in supply and demand for different commodities |
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| Functions of a price system |
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Definition
| signals to everyone within the system as to what is relatively scarce and what is relatively abundant |
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Term
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Definition
| An act of trading, done on and elective basis, in which both parties to the trade expect to be better off after the trade |
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Term
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Definition
| the conditions under which the trade takes place |
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Term
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Definition
| all of the costs associated with exchange, including the informational costs and enforcing the contract |
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Term
| what is the role of middlemen |
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Definition
| specialize in lowering transaction costs |
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Term
| The rationing function of prices |
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Definition
| sychronization of decisions of buyers and sellers that lead to equilibrium |
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Term
| Rationing must occur because of _______. |
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Definition
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Term
| The most efficient rationing mechanism is ______. |
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Definition
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Definition
| government mandated minimum or maximum prices |
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| implementing a legal maximum price |
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| implements a legal minimum price |
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Definition
| government established price floor |
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