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Definition
| the study of how societies allocate resources in face of scarcity |
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| the highest valued alternative not undertaken when a choice is made |
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| statements that describe what ought to be |
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| statements based on facts and are objective |
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| studies the choices individuals and firms make, the way these choices interact in markets, and the way governments influence choices and markets |
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| studies the performance of the entire economy |
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| to obtain more of something one must give up some of another thing |
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| there are limited resources and as a result people must make choices |
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| one must choose between one option and another |
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| factors of production/ resources |
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Definition
| land, labour, capital, and entrepreneurship |
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| skill and knowledge of workers |
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| are consumed over time..exceeding 1 year |
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| production possibilities frontier |
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Definition
illustrates opportunity costs
are possible combination's of output |
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| principle of increasing cost |
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Definition
| states that as production of one good expands the opportunity cost of producing another unit of this good generally increases |
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Definition
| when the only way to produce more of one goods is to give up something else |
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| exists when potential buyers want, can afford, and plan to purchase a good or service |
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Definition
| exists when potential sellers have technology, resources and plans to produce and sell a good or service |
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Term
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Definition
causes the demand curve to shift
1) price of substitutes P inc B D inc A
2) price of complements P inc B D dec A
3) income normal I inc D inc
4) income inferior I inc D dec
5) # buyers N inc D inc
6) preferences Fad D inc
7) expectations price P inc D inc
8) expectations income I inc D inc |
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Term
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Definition
changes in these factors change the supply schedule
1) input prices Cost inc S dec
2) resource availability inc S inc
3) number of sellers N inc S inc
4) technology S inc
5) expected prices Pe inc S dec
6) related goods in production P(b) inc S(a) dec |
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Definition
| quantity demanded equals quantity supplied and thus the price is stable. no forces act upon the price |
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| as price decreases quantity demanded increases and vice versa |
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Term
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Definition
| cateris parabus, as the price of a good increases the greater the quantity demanded and vice versa |
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Term
| nominal gross domestic product |
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Definition
refers to current prices and current quantities
SUM(P(t+1)*Q(t+1))-->calculates nominal GDP |
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| real gross domestic product |
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Definition
refers to constant prices and current quantities
SUM(P(ref point)*Q(t+1))-->real GDP calculation |
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Definition
| refers to a sustained decrease in the general price level |
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| refers to a sustained increase in the general price level |
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Definition
a permanent increase in a nations productive capacity
1) more resources
2) increase in productivity |
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Definition
| the domestic product demanded at each price level |
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| the domestic product produced by firms in an economy at each price level |
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Definition
| 1) finished goods (avoids double counting) |
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Term
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Definition
1) intermediate goods (counted already in final goods)
2) transactions in used goods
3) transactions in financial instruments
4) underground economy transactions
5) homework (sitter, maid)
6) leisure |
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Term
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Definition
| is consumed by the end user. intermediate goods are used to produce final goods |
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Term
| when can GDP too high a measure |
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Definition
1) bads are counted too
2) ecological costs included in prices and not netted out |
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Term
| when can GDP be too low a measure |
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Definition
1) valuation of longevity
2) leisure is not counted
3) barter and cash transactions |
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Term
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Definition
opportunity cost of programs
a) 1 prog, 9 shoes
b) 2 prog, 7 shoes
(9-7)/(2-1)= 2/1=2 |
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Term
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Definition
| [(normal GDP(t+1))/(real GDP (t+1))]*100 |
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Term
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| [(real GDP(t+1)-real GDP(t))/(real GDP(t))]*100 |
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Definition
| is unemployment associated with the changing of jobs in a changing economy |
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| full employment occurs when |
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Definition
1) there is no cyclical unemployment
2) there is only frictional and structural unemployment
3) the economy is at the natural rate of unemployment |
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Term
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Definition
| unemployed+discouraged/population(working age) |
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| as the opportunity cost of a good decreases |
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Definition
| people buy more of that good and also more of its complements |
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Term
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Definition
| An existing combination is allocative efficient if any other allocation makes one person better off and at least one person is made worse off |
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