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Definition
| Too many wants with too few goods |
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Term
| What role does economics play in scarcity? |
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Definition
| Allocate to satisfy wants |
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Definition
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Definition
| Cost of anything is the benefit of the best alternative given up |
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| Marginal benefit & marginal cost |
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Definition
| Continue when benefit out weighs cost, and stop when equal or when cost out weighs benefit |
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Term
| Where do we get theories/laws? |
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Definition
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Term
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Definition
| Observe, formulate hypothesis, test hypothesis, accept or reject or modify hypothesis, continue to test if necessary |
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Definition
| Economics on small scale like consumers or decision making by individual units |
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Definition
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Definition
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Definition
| Innovates using factors of production and takes risks |
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Term
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Definition
| Not capital, no a factor of production |
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Term
| Production possibilities model |
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Definition
| Assumptions: two commodities, full employment, fixed resources, fixed technology. Increase=economic growth (increase resources/technology) |
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Term
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Definition
1. Entrepreneurs direct economic activity
2. Market prices determining how resources are allocated
Private property, freedom of enterprise and choice, self-interest, competition, markets and prices
Austria, Switzerland, uk |
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Term
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Definition
| Government makes decisions |
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Term
| Objective of entrepreneur |
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Definition
| Maximize profit by minimizing costs |
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Term
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Definition
1. What goods/services will be produced?
2. Who gets them?
3. How to produce them?
4. How will system accommodate change?
5. How will system promote progress? |
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Term
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Definition
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Term
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Definition
| Creative destruction, VHS to DVDs and mail to email |
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Term
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Definition
| Wealth of nations 1776. Father of modern economics |
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Term
| Market system better because... |
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Definition
-allocate resources efficiently
-incentive (American dream)
-freedom to pursue self-interest |
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Term
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Definition
| Price and quantity demanded are inversely related because of diminishing marginal utility (decreasing additional satisfaction) |
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Term
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Definition
Change in...
-# of buyers
-consumer expectations
-buyers' tastes
-income ( normal or inferior goods)
-price of related goods (substitutes or complements) |
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Term
| Coefficient of elasticity |
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Definition
Ed=0 perfectly inelastic
Ed=infinity perfectly elastic
0 < Ed < 1 = inelastic
1 < Ed < infinity = elastic
Ed=1 unit elastic |
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Term
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Definition
-%change in Q / %change in P
(Change in Q/(Q1+Q2)/2) / (Change in P/ (P1+P2)/2) |
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Term
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Definition
| On demand curve, bottom is inelastic top is elastic and midpoint is unit elastic |
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Term
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Definition
1. When they move opposite = elastic
2. When they move the same direction = inelastic
3. When price is up or down and total revenue is unchanged = unit elastic |
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Term
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Definition
Positive = substitutes
negative = complements |
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Term
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Definition
Positive= normal good
negative = inferior good |
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Term
| Difference between private & public goods |
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Definition
-excludability
-rivalry
-can't divide public goods |
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Term
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Definition
Spillover benefit = positive externalities
Too little is produced ( government gives subsidies to
consumers/producers)
Spillover cost = negative externalities
Too much produced (government can tax) |
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Term
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Definition
| Satisfaction (subjective phenomenon) can only be measured by ordinal #s (1st, 2nd, 3rd...) |
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Term
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Definition
-generalizations
-other things equal assumption
-graphical expression |
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Term
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Definition
| Big picture (economy as a whole or it's basic subdivisions or aggregates) |
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Term
| Individual's economizing problem |
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Definition
-limited income
-unlimited wants
-budget line
-tradeoffs/opportunity costs |
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Term
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Definition
| Land, labor, capital, entrepreneurial ability. Factors of production |
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Term
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Definition
| Division of labor/ geographic |
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Term
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Definition
| Dollar ballots vote by purchasing commodity. Method for consumers to determine which goods will be produced and determines which products/industries survive or fail. |
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Term
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Definition
| Unity of private and social interest, virtues of market system (efficiency, incentives, freedom), 1776 wealth of nations by Adam smith |
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Definition
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Term
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Definition
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Term
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Definition
| Sell resources, buy products |
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Term
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Definition
| Buy resources, sell products |
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Term
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Definition
Change in...
-prices of other goods
-producer expectations
-# of suppliers
-resource prices
-technology
-taxes/subsidies |
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Term
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Definition
Maximum price, set below equilibrium price, rationing problem, black markets, shortages, excess demand.
Ex: rent control |
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Term
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Definition
| Minimum price, above equilibrium, surplus |
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Term
| 2 ways of measuring elasticity |
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Definition
Formula method (quantitative)
Totally revenue method (qualitative) |
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