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Definition
| The study of how people use their scarce resources to satisfy their unlimited wants |
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Definition
| Inputs, or factors of production, used to produce the goods and services that people want |
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| What do resources consist of? |
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Definition
| Labor, capital, natural resources and entrepreneurial ability |
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| Physical and mental effort sued to produce goods and services |
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| The buildings, equipment and human skills used to produce goods and services |
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| All gifts of nature used to produce goods and services |
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| The imagination required to develop a new product or process |
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| A profit-seeking decision maker who starts with an idea, organizes an enterprise to bring the idea to life and assume the risk of the operation |
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| Payment to resource owners for labor |
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| Payment to resource owners for the use of their capital |
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| Payment to resource owners for the use of their natural resources |
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| Reward for entrepreneurial ability; sales revenue minus resource cost |
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Definition
| A tangible product used to satisfy human wants |
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Definition
| An activity or intangible product used to satisfy human wants |
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Definition
| Occurs when the amount people desire exceeds the amount available at zero price |
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| Set of arrangements by which buyers and sellers carry out exchange |
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Definition
| Market in which a good or service is bought and sold |
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| Diagram that traces the flow of resources, products, income and revenue among economic decision makers |
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Definition
| Each individual tries to maximize the expected benefit achieved with a given cost or to minimize the expected cost of achieving a given benefit. |
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Definition
| The study of economic behavior in particular markets |
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Definition
| Study of economic behavior of entire economies |
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Definition
| Simplifiction of reality used to make predictions about cause and effect in the real world |
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Term
| Other-things constant assumption |
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Definition
| Assumption that when focusing on the relation among key economic variables that other variables remain unchanged |
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Term
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Definition
| An assumption that describes the expected behavior of economic decision makers |
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Term
| Positive economic statement |
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Definition
| Statement that can be proved or disproved by reference to facts |
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| Normative economic statement |
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Definition
| A statement that reflects an opinion which cannot be proved or disproved by reference to facts |
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Term
| Association-is-causation fallacy |
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Definition
| The incorrect idea that if two variables are associated in time, one must necessarily cause the other |
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Term
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Definition
| The incorrect belief that what is true for the individual must necessarily be true for the group |
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Term
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Definition
| The value of the best alternative forgone when an item or activity is chosen. (The opportunity |
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Definition
| Cost that has already been incurred, cannot be recovered and is irrelevent for present and future economic decisions |
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| Law of comparative advantage |
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Definition
| The individual, firm, region or country with the lowest opportunity cost of producing a particular good should specialize in that good |
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Definition
| Ability to make something at a lower opportunity cost than other producers face |
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Term
| Production possibilities frontier PPF |
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Definition
| Curve that shows alternative combinations of goods that can be produced when available resources are used efficiently |
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Term
| Law of increasing opportunity cost |
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Definition
| To produce more of a certain good a larger amount of another good must be sacrificed |
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Definition
| Increase in economy's ability to produce goods and services |
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Definition
| An economic system characterized by the private ownership of resources and the use of prices to coordinate economic activity in unregulated markets |
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Definition
| Public ownership of resources and centralized planning |
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Definition
| Economic units formed by profit-seeking entrepreneurs who employ resources to produce goods and services for sale |
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Definition
| A legal entity owned by stockolders whose liability is limited to the value of their stock ownership |
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Definition
| Group of people who pool their resources to buy and sell more efficiently |
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Definition
| A sole supplier of a product with no close substitutes. |
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Definition
| When it is cheaper for one firm to service a market rather than multiple firms competing. (Electricity) |
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Definition
| A good that is rival in consumption and exclusive |
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Definition
| A good that once produced is available for all to consume regardless of who pays and doesn't. Non rival and non exclusive |
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| If a good is rival it means |
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Definition
| That the amount consumed by one person is unavailable to others |
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| If a good is exclusive it means |
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Definition
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Definition
| A cost or benefit that falls on a third party of the market. (Local people affected when factory is polluting the air) |
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Term
| Ability to pay tax principle |
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Definition
| Those with greater income should pay more taxes |
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Term
| Benefits received tax principle |
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Definition
| Those who get more benefit from the government program should pay more taxes. |
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Term
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Definition
| Relationshhip between the price of a good and the quantity that customers are willing and able to buy |
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Term
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Definition
| Quantity of a good that customers are willing to buy relates inversely to the price |
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Term
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Definition
| Curve showing the relationship between price of a good and quantity consumers are willing to buy |
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Term
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Definition
| Amount of a good consumers are willing to buy as reflected by a point on the demand curve |
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Term
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Definition
| A good for which demand increases (shifts rightward) as consumer income rises |
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Term
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Definition
| A good for which demand decreases (shifts leftward) as consumer income increases |
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Term
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Definition
| Goods that relate in such a way that an increase in the price of one would lead to an increase in demand for another |
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Term
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Definition
| Goods that are are used together relate in such a way that an increase in the price of one decreases the demand for another |
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Term
| What causes shifts of the demand curve |
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Definition
Change in consumer income
Change in price of other goods
Change in consumer expectations
Changes in the number of consumers
Change in consumer tastes |
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Term
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Definition
| Relationship between the price of a good and the quantity that producers are willing and able to sell |
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Term
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Definition
| Amount of a good that producers are willing and able to sell is proportional to its price |
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Term
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Definition
| The amount offered for sale at a particular price as reflected by a point on the supply curve |
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Term
| Shifts of the supply curve |
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Definition
Changes in technology
Change in the price of resources
Changes in the price of other goods
Changes in producer expectations
Changes in the number of producers |
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Term
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Definition
| At a given price the amount, quantity supplied exceeds quantity demanded. Drives price down |
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Definition
| At a given price the amount demanded exceeds the quantity supplied. Drives price up |
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Term
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Definition
| Condition that exists in a market when quantity demanded equals quantity supplied and the market clears |
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Term
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Definition
| Minimum legal price to sell an item. Set above equilibrium price. |
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Term
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Definition
| Maximum legal price to sell an item at. Set below the equilibrium price |
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Term
| Price elasticity of demand |
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Definition
| Measures how responsive quantity demanded is to a price change |
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Term
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Definition
| A change in price that has little or no effect to the quantity demanded. Results in price elasticity of less than 1.0 |
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Term
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Definition
| A change in price that has a large effect on the quantity demanded. Results in price elasticity of greater than 1.0 |
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Term
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Definition
| The percentage change in quantity demanded equals the percent change in price. Results in price elasticity of 1.0 |
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Term
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Definition
| Price times the quantity demanded at that price |
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| Price elasticity of supply |
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Definition
| Measures the responsiveness of quantity supplied to a price change |
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Term
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Definition
| Quantity supplied or demanded/ Price change |
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Term
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Definition
| The percentage changes in demanded divided by the percentage change in consumer income. Value is positive for normal goods and negative for inferior goods. |
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Term
| Cross-price elasticity of demand |
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Definition
| Percentage change in demand of one good divided by the percentage change in the price of another good. Positive for substitutes and negative for complements. Zero for unrelated goods. |
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